RBC: Weaker CNY Needed To Weather Growth Headwinds

RBC note that “China's growth bounce from the shock of the spring lockdowns is fast losing momentum amid the moribund property sector and zero-Covid-related uncertainties.”

• “Beijing has also been reluctant to unleash the necessary broad and large-scale stimulus necessary to revive the economy convincingly.”
• “The one bright spot for the economy is exports, and weak import demand has driven the external balance into further surplus. However, the global growth slowdown will likely raise the pressure on exports in coming months.”
• “The trade-weighted CFETS Index is still up some 3.3% over the past year, and almost 12% since August 2020, and thus there is ample room for a further pullback in the currency.”
• “We reiterate our USD/CNY CNY7.00 forecast for Q123 with the expectation that the PBOC will not cap further upside in USD/CNY when the broad US dollar uptrend resumes in coming weeks.”