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Analysts at Nomura explained that they expect export growth to moderate in May on RMB appreciation over the past year and the slowdown in Europe and Japan, China’s second- and third-largest markets.  

Key Quotes:

“Import growth is likely to slow, but at a moderate pace, as China may start increasing its imports, especially of agricultural and energy products, from the US. Notably, the already announced tariff reduction on automobile imports will come into effect on 1 July, which may trigger some postponement of import orders and thus constitutes a downside risk to our export growth forecast.”

“CPI inflation is likely to rebound as high-frequency data suggest some pick-up in food price inflation. We expect a continued rise in PPI inflation, partly due to a low base last year and in line with the improvement of price-related subindices in the official manufacturing PMI.”

“Our FX strategists believe China’s headline FX reserves will fall by USD15bn to USD3109.9bn in May. After adjusting for FX and coupon effects, we estimate the adjusted change to rise by USD8.2bn, from USD2.1bn in April.”