China's trade data probably shows a modest recovery in exports

The holiday distortion in China is now over, and exports are expected to have grown 3.5% y/y in April, versus a 15.0% y/y contraction in March. This is still a weak reading relative to average export growth of 4.6% in Q1, as official PMI new export orders continued to soften in April amid varied stages of recovery in the US, the EU and Japan. 

According to Standard Chartered, imports to have dropped 10.5% y/y, versus a 12.7% drop in March, as domestic demand remains sluggish amid China's economic slowdown. The import price index fell 10.5% in March, the most since November 2009, which also contributed to the contraction of imports. As a result, the trade surplus may have widened to USD 42.9bn from USD 3.1bn in March. 

Exports will gradually pick up in H2 on the recovery at China's main trading partners, and the annual trade surplus is expected to exceed last year's. This should be a fundamental factor supportingChinese yuan (CNY) strength.