China: Gradual slowdown in trade ahead - Nomura

After China’s export growth in USD terms rebounded to a stronger-than expected 12.9% y-o-y in April from -2.7% in March, analysts at Nomura maintain their call for a gradual slowdown in export growth this year.

Key Quotes

“Despite a rebound, export growth in April was lower than Q1’s 14.1% y-o-y. We do not believe Sino-US trade tensions will dissipate immediately, but they may still escalate occasionally despite ongoing negotiations, weighing on the export outlook. Depreciation of the RMB real effective exchange rate helped Chinese exports in 2017, but the recent appreciation means this tailwind has shifted to become a headwind.”

“We expect imports to maintain double-digital growth this year, but to slow gradually as domestic demand is set to moderate as the economy slows. China’s pledge to voluntarily increase imports poses upside risks to our forecast, but will depend on to what degree China fulfils its pledge.”

“We maintain our call for a prudent and neutral monetary policy stance, accompanied by a slightly contractionary fiscal policy stance through this year.”