After disappointing in October, Chinese exports returned to their growth path in November, rising again by 5.9% year-on-year. Exports in November were therefore not slowed down by the fact that the USD/CNY had recently fallen, reaching its lowest level since last summer – which means a stronger Chinese Yuan (CNY), Commerzbank's FX analyst Volkmar Baur notes.

Producer price deflation keeps China’s real CNY competitive

"In the current quarter, the CNY has even gained against all G-10 currencies so far and is only behind a handful of major currencies such as the South African rand and the Malaysian ringgit. One reason why this nominal appreciation of the CNY does not seem to be weighing on exports could be provided by the data to be released on Wednesday: the inflation figures."

"Despite the nominal appreciation of the CNY, the real CNY still looks somewhat different. Inflation, especially on the producer side, is still very low in China, which continues to benefit Chinese exporters despite a slight nominal appreciation of the CNY."

"For example, producer prices fell by 2.1% over the last 12 months, while they rose by 2.7% in the US. With an unchanged exchange rate, this development alone would therefore mean a cost advantage of around 5%. In real terms, the CNY therefore continues to weaken, still offering exporters a favourable environment."