China’s exports, measured in yuan, rose 13.8% year on year in May, up from 9.8% in the prior period. The acceleration points to firmer momentum in outbound shipments when viewed in local-currency terms.
The latest reading marks a 4.0 percentage-point increase from the previous figure. The data refer specifically to CNY-denominated exports and describe year-on-year growth for May.
Strong Global Demand And Boost For Chinese Assets
The jump in China’s export growth to 13.8% is a clear signal of surprisingly strong global demand and a robust manufacturing sector. We see this as a reason to be bullish on Chinese-related assets in the short term. We are looking at buying call options on the FTSE China A50 index, as companies within this index are direct beneficiaries of a stronger trade environment.
This export strength will increase demand for industrial commodities used in production. We have already seen iron ore futures for August delivery climb past $115 per tonne, and we expect this trend to continue as steel production ramps up. Therefore, we are adding to long positions in copper futures, as prices have broken through key resistance, suggesting more upside ahead.
Currency Impacts And Broader Economic Implications
The increased trade flows should also support the Chinese currency. The offshore yuan (CNH) has already strengthened to 7.22 against the US dollar, its firmest level in two months, and we anticipate a further move towards 7.15. Consequently, we are also bullish on the Australian dollar, given that a healthy Chinese manufacturing sector has historically lifted demand for Australia’s raw material exports.
This data also counters some recent concerns about a global slowdown, especially with US inflation ticking down to 2.8% last month. We are seeing evidence of this renewed activity in shipping rates, with the Drewry World Container Index rising 4% just last week. This indicates that the physical movement of goods is accelerating, and we may look at options on major logistics and shipping companies.
