China’s trade data continues rebound, pressure for RMB appreciation

BEIJING - China’s export growth picked up to 7.2% y/y in June, lower than market expectations but up from 7.0% in the prior month, suggesting that external demand continues to improve. Imports grew 5.5% y/y versus -1.6% in May, showing that the effects of a commodity financing crackdown have gradually faded. Meanwhile, ANZ Bank reports that commodity prices led by copper have rebounded significantly in the past few weeks, suggesting that domestic demand has been improving.

ANZ says the improving trade figures, plus encouraging PMI data, suggest that China’s growth will likely pick up somewhat in Q2, due to the targeted ‘mini stimulus’ measures, and that China will achieve 7.5% growth in Q2.
“The trade surplus exceeded US$30 billion again in June, and continues to add pressures on RMB appreciation in the foreseeable future,” ANZ says. “We maintain our forecast that the RMB will appreciate slightly to 6.15 by the end of this year, compared with the current spot rate at 6.20. However, if the PBoC encourages more capital outflows, especially from the private sector, in the next few months, the RMB could weaken again.” www.live.anz.com (ATI).