China: Solid trade data may cap USD/CNY, but not support CNY Index – RBS

Research Team at RBS, notes that the Chinese exports growth remained steady in August, narrowing contraction in USD terms from 5.4% y/y previously to 2.8% y/y and gathering speed in yuan and volume terms as well.

Key Quotes

“Imports recovery suggests China's real activity may have firmed up in August. China’s imports recovered from 12.5% y/y previously to 1.5%y/y in August in USD terms posting the first monthly gain since October 2014 and beating expectation by a large margin.

The details suggest that China’s construction and investment demand may have improved during the past month. Our China economist Harrison Hu expects next week's real activity data to confirm that China's real economy held up well in August, with IP growth likely edging up from 6%y/y previously to 6.2%y/y.

In the meantime, China’s FX reserves came in slightly weaker than expectation, dropping $15.9bn in August and bringing outstanding value to $3.185tn. More importantly, the underlying FX outflows have so far stayed larger than calculated from headline FX reserves, suggesting China residents' demand for dollars remains strong.”