Compared to the strong rebound in July export growth, according to customs data, we think the slight pullback in YoY growth of export delivery values can more accurately illustrate the current situation of a moderate recovery in China’s external demand. China’s overall net foreign investment demand is likely to grow more slowly, considering the long-term trends in falling savings rates and rising consumption amid the economic restructuring. Unless the renminbi weakens sharply, it will be difficult for China’s exports to return to sustained double-digit growth rates seen in the past.

In the short term, we still expect China’s export growth to rebound slightly, driven by the US economic recovery. The shares of the US and the EU in China’s exports have stabilized and picked up this year. Historical data shows that rising US GDP growth will significantly drive up growth of China’s exports to the US, and the earlier weakening of the renminbi will also have a positive effect on China’s exports to the US (it will take about three quarters to be felt). Growth of China's exports to the US is likely to rise further in the next few quarters.

China might find it difficult to benefit much in terms of trade from the economic sanctions imposed by western countries on Russia. Although bilateral trade between China and Russia could expand, the direct boost to China’s overall trade growth should be quite limited. Meanwhile, geopolitical tensions are likely to hinder economic growth in the EU, a major trading partner of China, which would hurt China’s external demand.