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ChartBrief 91 - Surprising surge in Chinese exports will prolong the rebound

The world's second largest economy has reported a number of interesting datapoints for those willing to dig a little to get to the economic data pay-dirt. The first indication is in the sub-indexes of the official PMI: indeed the latest results for June show new export orders +1.3 to 52.0 - at their strongest point since April 2012. The second indication is the surge in rail freight traffic volume growth - an indicator which had actually crashed to the worst pace of growth on record in late 2015. The third point is the rebound and ongoing upward trend in the China Containerized Freight Index, which also provides an insight into and confirmation of the trade rebound for China. Fourth is the weakening of the Renminbi, in this case we show a chart of the BIS real effective exchange rate, and there is a clear historical link between a weaker currency and better export growth. Finally the fifth point is the plain old headline official export numbers which have turned around.

Overall there are a number of different data points that outline the rebound in Chinese exports, and the potential is there for this to further surprise to the upside against the almost perennial negative postulations and prognostications on the outlook for China. It's not to say there are not risks in China - indeed we advise clients to look closely at the property market. But at least on the global trade front, there is a tailwind for China's economy, and that could prolong the current stimulus induced upturn in China macro; which would extend the reflation, commodities, and EM theme.

The weaker currency has helped boost exports, and along with the surge in rail traffic volume growth, the headline export numbers have rebounded.

A more obscure China/global trade indicator; the China Containerized Freight Index shows an initial rebound and general upward trend, reflecting improved demand for shipping.

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