China releases August trade data today, with exports forecast to accelerate to 25% year-on-year and imports to 30%. Economists say a beat, especially on imports, could firm up AUD/USD as traders read China's demand strength through the currency's role as a China proxy trade.
China's August trade figures land today, and a Reuters poll of economists points to exports rising 25% year-on-year, building on July's 23.9% gain. Imports are forecast to climb 30% year-on-year, up from 27.5% previously, while the trade surplus is expected to widen to around $119.05 billion from $112.5 billion in July.
Exports carry a strained domestic economy
Exports have become the pillar sustaining Chinese growth this year, as tepid domestic consumption and a prolonged investment slump weigh on the broader economy, according to Reuters. That reliance carries its own complications: continued export strength reduces the political urgency for Beijing to address weaker segments of the economy such as property, even as it keeps trade frictions with major partners in focus.
Why imports may matter more for AUD
For markets, the import side of the release may carry more signal than the export figure. A stronger import number would point to some genuine pickup in domestic demand rather than simply reflecting re-exported components, and tends to be read more favourably by commodity-linked currencies such as the Australian dollar, given the trade relationship between the two economies. An export beat alone, without a matching pickup in imports, would likely be read as more of the same pattern that has defined the year: an economy leaning on external demand while domestic momentum lags behind.
Growth backdrop still under pressure
The wider GDP picture adds context to today's release. China's economy expanded 4.3% in the second quarter, a slowdown from a stronger start to the year, leaving policymakers' 4.5-5% full-year target harder to reach without a pickup elsewhere. August's official manufacturing PMI improved from July's level even though it stayed in subdued territory overall, suggesting the domestic side of the economy is stabilising rather than genuinely recovering.
A miss on either side of the trade data would reinforce concerns that the still-subdued manufacturing PMI reading is the more accurate signal of underlying momentum than the trade headline.
Source: InvestingLive
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