Dr. Henry Hao at Commerzbank reports a strong upside surprise in China’s June trade data, with exports up 27% and imports 36% year-on-year, driven by global AI infrastructure demand. He notes booming external accounts contrast with weak domestic consumption, but the sustained surplus and a CFETS RMB index above 102 underpin Yuan resilience, even as USD/CNY and USD/CNH edge higher on broader Dollar firmness.
Trade surplus anchors yuan strength
“China’s June trade data delivered an upside surprise, cementing the AI-driven export boom as the major force shaping the country’s external accounts. Exports rose 27.0% yoy in June (Bloomberg consensus: 19.0%) vs 19.4% gain in May.”
“Attention is now turning to Wednesday’s Q2 GDP release, where the Bloomberg consensus points to growth of 4.5% yoy, a deceleration from 5.0% in Q1. On Monday, Premier Li Qiang pledged to step up countercyclical policy adjustment and unlock domestic demand potential, reinforce our view that policymakers are alert to the growth slowdown risk and stand ready to act if the data disappoints.”
“The structural divergence between a booming external sector and persistently weak domestic consumption remains the central tension in China’s K-shaped economic narrative.”
“The trade beat reinforces the case for continued yuan resilience. The CFETS RMB index has been trading above 102 since late June, a level last seen four years ago.”
“The sustained surplus flow provides a fundamental anchor for CNY strength. In FX, USD/CNY rose 50 pips to 6.78 and offshore USD/CNH edged up 30 pips to 6.79 yesterday, reflecting modest USD firmness ahead of the trade release.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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