China's imports continue to grow at a faster pace than in previous years
Yuan devaluation talks have come back into focus following Chinese premier Li Keqiang's comments here. And aussie bulls are cheering the fact that the yuan won't be used as a weapon in the trade rhetoric for China to boost its exports.
For now, China's exports haven't slowed down to worrying levels just yet despite US tariffs. August exports in USD terms showed a growth of 9.8% y/y, slowing from July's 12.2% y/y reading. That's still a relatively solid reading when put into context of previous years.
But the more telling sign that authorities will not deploy extensive yuan devaluation in the trade war just yet is the fact that imports continue to grow greater and larger. In USD terms, August imports grew by 20.0% y/y (as shown in the graph above). And that continues to highlight the growing importance of how much China relies on overseas purchases and consumption.
A weaker currency would mean more expensive imports and with consumers and companies already burdened by the ongoing tit-for-tat tariffs with the US, the last thing China wants is to burden them even more through a direct hit such as a weaker yuan.
In essence, this is also an indirect positive for the aussie - as we have seen in the reaction earlier. As long as the yuan stays supported at around 6.90 against the dollar, the aussie can find a reason to breathe a much needed sigh of relief considering how tied the currency's trading performance is to the yuan:
