China trade outperforms amid tech boom and US rebound
The desk interprets recently outperforming trade data from China as a potential tailwind for the CNY, as the nation sees a significant rebound in exports, particularly to the US. According to a recent note released by ING, China's trade surplus hit $104 billion in May, driven by external demand and base-effect dynamics from the previous year. This better-than-expected export growth, at 19.3% year-on-year against a 15.0% forecast, notably includes a 35.4% year-on-year increase in exports to the US, the strongest since 2021. Per the full note source, while exuberance may shift based on future data that normalizes post-trade war conditions, the current positive momentum provides a supportive backdrop for the CNY's stabilization against the USD amid a recovering global landscape.
What the desk is arguing
The desk highlights that China's robust trade data for May creates a favorable environment for the Chinese yuan (CNY). ING notes a significant increase in exports—particularly to the US—demonstrating resilience in external demand. The impressive growth aligns with the desk's perspective that stabilizing foreign demand could curtail fears about the CNY's depreciation.
In May, exports were cited as rising 19.3% year-on-year, well above market expectations of 15.0%. Additionally, the trade surplus reached a four-month high at $104 billion. This month-on-month acceleration not only boosts market confidence but also suggests a temporary alleviation of downward pressures on the yuan as exports to the US surged by 35.4% year-on-year—an effect closely linked to the previous trade warfare dynamics.
Where it sits in our coverage
Our internal strategy aligns closely with JPMorgan, projecting the CNY towards a target of 1.10 against the USD by March 2026. This view suggests a more favorable market position than BofA's contrary stance at 1.04, indicating a divergence in how firms assess China's macroeconomic stability post-trade recovery. With our firm's call resting significantly higher than the lower bound of the spread, there is confidence in emerging market resilience on the back of this data.
How other firms see it
Several aligned firms, including JPMorgan and others, view the recent trade figures as a solid indicator of economic strength, favoring CNY appreciation. Conversely, BofA presents a cautious outlook, likely driven by potential concerns over sustainability in export growth.
Market participants should particularly pay attention to currency pairs influenced by US-China trade dynamics and gauge the impact on CNY against the USD and broader global commodities.
What the calendar says
There are no immediate high-impact events scheduled over the next 30 days in this jurisdiction. However, continued market observation is crucial as we await upcoming economic indicators that could validate or challenge current trade momentum and its implications for the CNY.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01China's trade surplus reached $104 billion in May, led by a 19.3% YoY export increase.
- 02Exports to the US surged by 35.4% YoY, influenced by previous base effects.
- 03The strong performance in trade bolsters confidence in the CNY amidst global economic recovery.
Market implications
Traders should remain vigilant for potential upward pressure on CNY as it responds to positive data beats. The key market level to monitor will be the USD/CNY at around 1.07, especially in light of possible changes in US trade policy and bilateral negotiations.
Risks to this view
If future trade data shows a decline in demand or a shift in tariff dynamics ahead of the anticipated normalcy post-trade war, the bullish sentiment for CNY could rapidly reverse. Any signs of escalating geopolitical tensions may also introduce volatility.
Older quick take Quick take 05:45 China China trade outperforms amid tech boom and US rebound China's trade data beat market expectations across the board in May, with shipments to the US seeing a strong base-effect-driven bounce. External demand continues to be one of China's key growth engines this year, but higher imports could cut into the trade surplus going forward Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Lynn Song Chief Economist, Greater China USD 104bn China's May trade surplus A 4-month high as both exports and imports beat forecasts Higher than expected Exports saw big boost from recovery of exports to US China's exports rose by 19.3% year-on-year in May (market forecast 15.0%, ING 19.4%), which was up from 14.1% YoY in April. This is in line with our forecast, though stronger than market forecasts.
The increase marked a 3-month high, and brought the year-to-date export growth to 15.5% YoY. By export destination, the big story for May was a strong rebound of exports to the US, which rose to 35.4% YoY, the highest growth level since 2021. This recovery is primarily a base effect story rather than a reflection of Trump's visit to China.
Recall that May 2025 marked the peak of the US-China trade war, when additional tariffs on China surged to 125%. This effect will likely weaken starting with next month's data. We'll start to get a more realistic look at trade in the months ahead under the current tariff environment.
The recovery we have seen in the last two months brought year-to-date exports to the US to -2.7% YoY. If we see exports return to positive growth this year, it will remove the biggest drag on China's exports from last year. Tangible trade deliverables looked rather limited after Trump's visit to China.
Announcements focused on restoring agricultural purchases to "normal" levels, but moves to establish a trade board and adopt a "constructive strategic stability" approach to bilateral relations could help both sides avoid major trade clashes like last year. There is hope that we'll see further trade breakthroughs before or after President Xi's possible visit to the US in September. Looking at other areas, exports to South Korea were also very strong (42.1%) as tech trade has accelerated.
We also saw strong export growth to ASEAN (24.3%) and Russia (35.8%). The key laggards were exports to the EU (7.6%) and Japan (10.9%). By export product, the same trends from the past few years continued.
China's exports of hi-tech products (50.9%), semiconductors (110.9%), automatic data processing machines (66.0%), mobile phones (44.3%), autos (39.3%), and ships (31.0%) continued to grow strongly in May. Export restrictions may have contributed to the YoY declines observed in March and April. We also saw China's refined petroleum exports rebound to 27.2% YoY in May.
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