Goldman Sachs Group Inc. said some investors may have overestimated the scale of capital repatriation from China to the yuan because companies may not yet be ready to give up their dollar holdings, according to Bloomberg. U.S. assets remain attractive to Chinese companies as the interest rate differential between China and the United States remains large and domestic sentiment is weak.

The yuan extended its recent gains on Friday to its highest level in more than a year as investors tried to assess the size of Chinese companies' foreign exchange reserves and the likelihood of them repatriating them, further boosting the yuan.

Goldman Sachs analysts pointed out that exporters' dollar hoarding is relatively small from mid-2022 to 2024. The recent appreciation of the RMB against the US dollar is mainly driven by external factors, especially the market's expectations for the Federal Reserve's accelerated rate cuts and the US election.

Goldman Sachs believes that China's weak domestic fundamentals are likely to dominate in the medium term, and the yuan is expected to underperform major currencies. In contrast, Eurizon's CEO Jen believes the impact of repatriated funds will be similar to that of "HSBC Holdings Plc strategists."

Goldman Sachs pointed out that the potential returns of US assets are still high, which is a key factor in the decision-making of Chinese companies to repatriate. Corporate feedback shows that they will only sell US dollars when the interest rate differential changes or they are confident in the downward trend of the US dollar.