Exports aren't collapsing, but they are now starting to slide. In August shipments fell for the second consecutive month; growth in imports of components turned negative, and now point to exports falling YoY into Q422; exports to the US fell quite sharply in August, consistent with data from other economies in the region, and suggesting a shift in the surge in DM demand since 2020; and exports in Asia in general are closely following our model, which points to more downside ahead.
Imports also fell MoM in August, though unlike exports, purchases from abroad have been weak for several months already. That is linked with the slowdown in domestic demand which, with the continued weakness in real estate and the impact of the covid restrictions, is likely to be worsening still.
The weakness of imports will continue to sustain the trade surplus, even as the peaking of exports likely brings to an end the dramatic widening of the trade surplus that has occurred since 2022. That widening hasn't been particularly important for the currency, and the CNY is likely to continue to depreciate, driven by both the weakening cycle, and the related widening of interest rate differentials.