China’s yuan advanced to its strongest level in more than three years against the US dollar on Thursday as markets reacted to the beginning of high-level talks between President Donald Trump and Chinese President Xi Jinping.

The onshore yuan strengthened to approximately 6.7862 per dollar, while the offshore yuan traded near 6.7852, both reaching their highest levels since early 2023.

The move came after the People’s Bank of China set its strongest official midpoint guidance since March 2023.

Despite the stronger fixing, analysts noted the central bank continued signaling caution by setting the midpoint weaker than market estimates, suggesting authorities still want to avoid excessive currency appreciation.

Trump-Xi Summit Draws Global Attention

The two-day summit between Trump and Xi has become the primary focus for global financial markets this week.

The discussions are expected to cover trade relations, technology competition, artificial intelligence development, and geopolitical tensions tied to the Middle East conflict and Taiwan.

Trump described Xi as both a “great leader” and a friend as talks formally began, signaling efforts to maintain diplomatic stability despite ongoing strategic rivalry between the two countries.

Analysts noted that Beijing appears focused less on securing major policy breakthroughs and more on projecting stability and economic confidence to both domestic and international audiences.

Chinese Stocks Slip Despite Currency Strength

While the yuan strengthened, Chinese equities moved lower during Thursday trading.

The benchmark Shanghai Composite Index declined roughly 1%, while the blue-chip CSI 300 Index fell around 1.3%.

Investors appeared cautious amid uncertainty regarding the summit’s outcomes and broader global economic conditions.

Some market participants noted that expectations heading into the meeting remain relatively modest, which could leave room for positive market reactions if even limited agreements emerge from the talks.

AI and Technology Now Dominate Investor Focus

Investors increasingly appear more interested in artificial intelligence growth and technology competition than renewed tariff battles.

Market strategists said capital markets have become less reactive to traditional trade-war headlines compared with previous years.

Instead, attention has shifted toward semiconductor development, AI infrastructure, cloud computing, and broader technology self-sufficiency efforts in both countries.

Several analysts argued that competition between China and the United States in artificial intelligence could ultimately accelerate innovation and strengthen AI capabilities globally.

Strong Exports Continue Supporting the Yuan

China’s currency has also benefited from resilient exports and a substantial trade surplus throughout the year.

The yuan has appreciated roughly 3% against the US dollar in 2026 while also strengthening against many of China’s major trading partners.

Analysts believe strong export performance, particularly in AI-related supply chains and industrial goods, has helped reinforce investor confidence in China’s broader economic resilience.

The stronger currency also reflects expectations that Chinese policymakers are becoming more comfortable with gradual yuan appreciation under current economic conditions.

Managed Trade Framework Under Discussion

Investors are also monitoring reports that the two countries may move toward a more structured trade framework for non-sensitive goods.

According to market discussions, Washington and Beijing could potentially identify certain categories of products where tariffs may be reduced without triggering national security concerns.

The proposed framework could help stabilize trade relations and reduce near-term risks surrounding additional tariff escalation.

Analysts said any progress toward a more predictable trade environment could improve business confidence and support financial markets over the coming months.

Geopolitical Risks Still Remain

Despite improving market sentiment around technology and trade stability, geopolitical risks remain significant.

Issues involving Taiwan, semiconductor restrictions, rare earth supply chains, and the ongoing Middle East conflict continue creating uncertainty for investors.

However, many market participants now appear to believe that both China and the United States have strong economic incentives to avoid a major escalation in tensions.

That belief has helped reduce market sensitivity to geopolitical headlines compared with previous periods of heightened trade conflict.

Markets Watching for Signals of Stability

For now, investors appear primarily focused on whether the summit can reinforce stability between the world’s two largest economies while allowing AI-driven growth momentum to continue.

Even modest diplomatic progress could help support broader investor confidence, particularly across technology, semiconductor, and AI-related sectors.

Currency markets, equities, and global risk sentiment are likely to remain highly sensitive to any major announcements emerging from the summit over the coming days.