进口激增将推动人民币进一步走强

China Macro Surge in imports should lead to further RMBstrength We are revising our view on the RMB, now expecting stronger appreciation thisyear, owing to China's very strong imports since the beginning of the year.Historyand our analysis suggestthatasurge inChina’simports of upstream products willlikely be followed by a further pickup in export orders, or a recovery of domesticdemand, or both. In any case, this will likely lead to a stronger RMB down the road.Ournewbaseline forecast is that RMB willappreciateto 6.55/USD by end-2026and 6.3/USD by end-2027. Deyun OuEconomist+852-2203-6166 A surge in imports reduced China’s trade surplus China’sexportshave beenstrong so far this year andwill likely continue…We’vewritten a few notes, exploring the multiple drivers (“AHEAD”: AI, HALO, Energy,Acceleratinggreen transition and Diversification) and explaining why this highexports growth will likely be sustained. …but it hasnot led to highertrade surplusesso far, owing to even fastergrowthinimports.Exports havebeenremarkablystrongsince the beginning of the year,growing by15% YoYin thefirst four months.But equally remarkable was thesurgeinimports, whichgreweven faster23% YoYin USD termsin January-April,outpacingexports by8fullpercentage points.As a result, China’s trade surplusdropped to 1.4% of GDPinthefirst 4 months, 0.2ppt lower than sameperiodlastyear. The high import growth in the first four monthscan be attributed to (1)AI-relatedproductssuch as chips, semiconductor equipment,and computers;and(2)upstreammanufacturinginputssuch asnon-ferrous metals, chemical products,andmachinery.Out of the USD 132bn increase in imports in Q1,about40% is AI-related, while another 30% aretraditionalupstreaminputs.Both pointto a re-stocking of industrial inventory. Meanwhile, oil prices’impacton imports appears to be limited.China’s importgrowth was already strong in Jan-Feb before the Iran war. Crude oil importswereflat YoY in thefirstfour months, contributing little to overall importgrowth. As oilimport prices surged 40% YoY in April, import volumedropped20% YoY, partiallyoffsetting the impact on imports. WhyareChinese manufacturerssuddenly importing moreand re-stocking theirinventory?History suggeststwo possible explanations. Onepossibility is thattheyareaccumulatingraw materials forfutureexports. The otherpossibilityisthattheyare preparing forstronger domestic demand.Thesetwoexplanationswouldimply different paths for futuretrade balance: -If imported materials arefor future exports,for example owing to globaldemand forAIdatacentersand EVs, then the natural next step is forexportsgrowth to rise further. The difference between import and exportgrowth will narrow, andtrade surplus will likely increase again. -Alternatively,ifdomestic demand is the main driverforimports(such asfordomesticinvestmentin AI andinfrastructureprojects), then importgrowthcould continue to outpaceexport growthfor a sustained period,and tradesurpluswill likely narrow further. We tend to believe that both paths are at play simultaneously.On externaldemand side, AI demand and data-center investment are still acceleratingglobally,evidenced by strong semiconductor exports from neighboringeconomies.China's export-order PMI is also rising, all indicating strengtheningexternal demand. Ondomestic demand side, China's fixed-asset investment hasreboundedsince year-beginning, manufacturing profits have recovered, and thereal estate market has shown signs of stabilization, all creating conditions fordomestic demandrecovery. RMB will have tostrengthen, one way or another Here comes the moreinterestingconclusion:regardless of what is driving theimports surge,it will likely eventually lead to the same destination:furtherstrength in theRMB. The rationale is simpleas follows: -Ifexternal demand is the main driverof recent imports,thenarrowingtrade surplus willonlybe transitory.China’s tradesurplus will likely widenagain,resulting inincreased exporter repatriation and a stronger RMB. -Ifrapidimportsgrowth isdriven bydomestic demand,thenChina’sgrowth and inflationwill likely pick up further.In that case, interest ratescould not stay at today’s nearhistorically lowlevels. Monetary policy willshift, liquidity will tighten, andtheinterbank market will have to price in astrongerrecovery, leading to RMB appreciation. Recent historyverifiesthisbullish RMB view.The situation where both importsand exportsaccelerate, but imports growing much faster than exports, hasoccurred twice in the past two decades,in 2010-11 and in 2017, respectively.Interestingly,the macroeconomic environment duringbothperiodsisalsosimilartotoday,namelyPPIexitingdeflationafter a period offiscalandmonetary policyeasing. -2010-11 was ascenario ofresonatingdomestic and external demand.Initially,high import growth benefited from China's stimulus plan.However,as the global economy recovered,export growth alsoaccelerated, eventually surpassing import growthby H22010.PBOC’smonetary policy response