The USD/CNH remains steady below the important resistance level of 7.2000. In July, China’s exports grew by 7.2% compared to last year, surpassing expectations. Shipments to the ASEAN region increased by 13.5%, and exports to the European Union rose by 7%. However, exports to the US fell by 12.6% year-to-date compared to the previous year. Imports into China unexpectedly grew by 4.1%, suggesting a fragile recovery in local demand. China faces three main challenges that hinder consumption growth: low household income, high savings for emergencies, and significant household debt. As a result, the country is still relying on infrastructure spending to meet its growth goals. While this boosts commodity prices, it could harm long-term economic health. Today’s date is 2025-08-07. The stability of USD/CNH below the key level of 7.2000 provides a strategic opportunity for us. Recent statements from the US Federal Reserve suggest they will pause interest rate hikes, while the People’s Bank of China continues with supportive policies. This makes a sudden breakout seem unlikely. We see value in selling out-of-the-money call options with strike prices above 7.2000, believing that the yuan won’t weaken significantly in the near future. China’s focus on infrastructure spending indicates strong demand in commodity markets. This is already shown by Dalian iron ore futures, which rose above $120 per tonne in late July 2025. We think buying call options on copper and other base metal ETFs is a good way to profit from this government-driven demand. The difference in trade data—strong exports to ASEAN and the EU but declining shipments to the US—suggests we should target specific investments. We should look for opportunities in Chinese companies heavily involved with Southeast Asia while being cautious about the overall market. Ongoing weak domestic consumption and tensions with the US make buying put options on a major index like the Hang Seng a sensible hedge. Reflecting on the past, we see similarities with events following the 2008 and 2015 economic slowdowns. Those periods also saw large commodity rallies due to infrastructure spending, which later contributed to the debt issues China now faces. This historical perspective supports our positive short-term outlook on commodities, while reminding us that this growth strategy isn’t sustainable.

here to set up a live account on VT Markets now