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Iris Pang, Economist at ING, notes that China’s exports grew 15.6% year-on-year, higher than the consensus of 11.7% and they believe this growth is due to exporters’ concern that the 10% tariffs on $200 billion of exported goods to the US will rise to 25% on 1 January 2019, which has led them to front-load exports.

Key Quotes

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

“We think that President Xi’s meeting with PresidentTrump at the end of November will not achieve positive results and as such the increase of the current tariff rate from 10% to 25% on $200 billion of US imported goods from China is highly probable.”

“We’re hoping  the meeting doesn’t damage the trade relationship even further, as Trump once said that if trade talks fail, he could raise tariffs on all Chinese imported goods.”

“Front-loading is also the reason for strong  import growth (at 21.4% YoY) though to a lesser extent, as importers worry that future export  growth will decline.”

“We do not think so as we believe that the USD/CNY and USD/CNH largely follow the direction of the dollar index. We believe in this  trade conflict that China will passively follow the dollar index to avoid being labelled a currency manipulator by the US, and to avoid further possible damage  on trade and investments.”

“Our forecasts on USD/CNY and USD/CNH at 7.0 and 7.30 by end of  2018 and 2019, respectively, are still intact.”