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Iris Pang, Economist at ING, points out that the Chinese exports grew 21.4%YoY, higher than the consensus of 11.7% but in line with our 23.0% forecast.

Key Quotes

“We believe that the cause of such strong growth is exporters’ concern that the 10% tariffs on $200 billion of exported goods to the US will rise to 25% on 1st Jan 2019, so they front-loaded export activities.”

“Front-loading export activities should continue in November and December. So export growth data will continue to be stronger than in previous holiday seasons.”

“As we expect President Xi’s meeting with Presdient Trump at the end of November will not achieve positive results, the increase of the current tariff rate from 10% to 25% on $200 billion of US imported goods from China is a high probability event.”

“We  hope that the meeting will not damage the trade relationship further as Trump once said that if the trade talks fail, then he could raise tariffs on all Chinese imported goods.”

“Front-loading is also the reason for strong  import growth (at 15.6%YoY) however to a lesser extent as importers worry that future export  growth will decline.”

“We do not think so as we believe that the USDCNY and USDCNH largely follow the direction of the dollar index.”

“Our forecasts on USDCNY and USDCNH at 7.0 and 7.30 by end of  2018 and 2019, respectively, are still intact.”