Societe Generale reports China’s trade surplus expanded sharply to USD 105.4 billion in May, significantly bolstering the case for yuan strength against expectations of continued weakness. The surplus widened on the back of a substantial 19.4% year-on-year jump in exports, with artificial intelligence-related equipment leading the surge. The French bank’s analysis suggests this robust trade performance provides fundamental support for the Chinese currency at a time when many market participants have been positioning for depreciation pressures.
The unexpectedly strong export growth, particularly in high-tech AI hardware, demonstrates resilient external demand for Chinese manufacturing despite ongoing geopolitical tensions and global economic uncertainty. The widening trade surplus increases dollar inflows into China and strengthens the yuan’s underlying fundamentals, potentially catching short-positioned traders off guard.
FXnCO Insight
Traders should reassess yuan short positions as the widening trade surplus and AI-driven export boom create upside risk to CNY forecasts, with potential for near-term appreciation against consensus bearish sentiment.
Source: FXStreet