The central government will face intense pressure to revalue the yuan downwards, not up, against the US dollar within a year or two.
That is the surprising conclusion of Eddie Wong, ABN Amro chief Asian strategist, at a time when the widely accepted view that the yuan is undervalued lies at the heart of Sino-United States trade tensions.
The unconventional prediction hinges on the premise that China's economy cannot escape the consequences of a short-sighted investment binge based solely on growth.
Profits of mainland firms - ranging from those producing building materials to consumer durables - are being squeezed by higher input costs, such as for raw materials and skilled labour, and by cutthroat competition stemming from gross industrial overcapacities.
Of the 17 H-share companies that reported first quarter results, 12 saw a drop in gross profit margins. Among the worst affected was China's largest cement company, Anhui Conch, which experienced a year-on-year 95.1 per cent drop in net profit in the first quarter. The country's largest chemical fibre producer, Yizheng Chemical, suffered a 97.5 per cent drop.
For many China-focused economists, the figures herald the imminent arrival of a downward cycle in the world's fastest growing economy.