USD/CNH is trading heavy under 7.0700. China’s November trade data continues to point at weak domestic demand activity and decoupling with the US. In the twelve months to November, China’s trade surplus totaled a record $1182bn, while the trade surplus with the US narrowed to a five-year low at $435bn, BBH FX analysts report.

China November exports beat, imports lag

"In November, exports recovered more than expected to 5.9% y/y (consensus: 4.0%) after falling -1.1% in October while import growth underwhelmed at 1.9% y/y (consensus: 3.0%) vs. 1.0% in October. Softer import growth underscores persistently weak domestic demand."

"China’s annual two-day closed-door Central Economic Work Conference kicks-off in the next few days. At that conclave, GDP growth target and stimulus plans for 2026 are set. Ahead of that meeting, the Politburo signaled again plans to have domestic demand be 'the main driver' of growth while maintaining a 'more proactive' fiscal policy and 'moderately loose' monetary stance."

"In our view, a continued appreciation in China’s currency could help the country shift its growth model towards consumer spending by boosting disposable income through cheaper imports. In parallel, China can tolerate a stronger currency with limited damage to the manufacturing sector as the yuan remains deeply undervalued. Bottom line: USD/CNH downtrend is intact."