The yuan hit a year-high 8.307 against the globally strong US dollar yesterday, and is expected to maintain its buoyancy throughout the rest of the year, according to economists.
The intra-day high on the interbank foreign exchange market was up from Monday's 8.3086.
'All the economic fundamentals point to a strong yuan, and the downside risk is getting smaller given the strong inflow of foreign investment and a improving external trade performance,' Natwest Markets senior China economist Charles Li said.
But Mr Li added, given the fact China's economy was not fully driven by market forces, the risk of a devaluation could not be ruled out for policy or political reasons.
He said the yuan had benefitted from US$19.8 billion of foreign direct investment in the first half.
Foreign trade also improved, swinging to a small surplus in the first half from a deficit in the first quarter.
China's foreign exchange reserves stood at $86.6 billion at the end of June, up from $73.6 billion at the end of 1995.