Two data releases in China, April trade data (Thursday) and CPI (Friday) have indirect but nonetheless important policy implications next week.
April trade data on Thursday should bounce back after a terrible showing in March - exports tanked -15.0% y/y (expected +9.0%) while imports fell -12.0% y/y (expected -10.0%). The +48.5% y/y spike in exports in February (another example of data distortions created by the Chinese Lunar New Year) and the possibility that U.S. port strikes further muddied the data.
At around 25% of GDP, Chinese trade is generally a key pillar of growth, but it has struggled to provide support amidst weaker global activity, even with additional credit availability and tax benefits accrued to exporters.
Scotiabank Economics says "From a policy perspective, we believe that the PBOC continues to primarily target financial stability and liquidity, but reduced inflows from trade activity indirectly play into that policy concern."
Similarly, Friday's CPI won't be important as a direct policy target, but higher inflation is needed to combat rising real rates, a concern that led to the February 28th interest rate cut and continues to weigh against easing initiatives.
