Import surge may drive further RMB strength

Overview

This report discusses the impact of China’s sharp import growth since the start of the year on the RMB exchange rate. Deutsche Bank believes the import surge has dampened the short-term trade surplus, but it may reflect stronger future export orders, a recovery in domestic demand, or both. Whichever path it takes, the result could ultimately be further RMB appreciation through a wider trade surplus, increased FX conversion by exporters, or a policy shift driven by stronger growth and inflation.

Core views

The report’s core judgment is that strong import growth is not a sign of RMB weakness; on the contrary, it may be a leading indicator of future RMB strength. If imports are being used for export production, then the narrowing in the trade surplus is only temporary, and the surplus may widen again once export growth catches up. If imports are mainly driven by domestic demand, China’s growth and inflation could recover further, requiring a repricing of rates and liquidity conditions, which would also benefit the RMB. Based on this analysis, the report raises its end-2026 RMB forecast to 6.55/USD and keeps its end-2027 forecast at 6.3/USD.

Analysis framework

The report uses trade data decomposition, import-category attribution, scenario analysis along external-demand and domestic-demand paths, and historical cycle comparisons to support the RMB appreciation logic. It focuses on the relationship between exports, imports, PPI, central bank policy rates, and RMB performance in the first four months of 2026 versus the 2010-11 and 2017 import-surge cycles.

Methodology notes

• Macro transmissionImport surge two-path framework

  Strong import growth may come either from pre-stocking for future exports or from a recovery in domestic demand.

  If imports are used for export-related production, the subsequent narrowing in the trade surplus is only temporary; once export growth catches up, the surplus may widen again. If imports are driven by domestic demand, growth, inflation, and interest-rate pricing may all need to be repriced upward, and both paths support RMB appreciation.

• Historical comparisonImport surge cycle comparison

  Compare the first four months of 2026 with 2010-11 and 2017.

  Historically, when imports and exports accelerated at the same time and imports grew faster, the RMB subsequently appreciated strongly; in 2010-11 it strengthened 7.8% versus the USD, and in 2017 it strengthened 6.7%.

• Export driverAHEAD framework

  AI, HALO, energy, accelerated green transition, and diversification are used to explain the resilience of Chinese exports.

  The report cites prior research arguing that these factors support the continuation of Chinese export growth, with AI demand and accelerated data-center investment currently being key external-demand clues.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• RMB vs. the USD

  Core beneficiary asset

  Strengths

  Strong import growth may signal improving export orders or a recovery in domestic demand, both of which support RMB appreciation; the report explicitly raises its end-2026 forecast to 6.55/USD.

  Weaknesses

  The short-term trade surplus has already narrowed, so if future export or domestic-demand improvements fail to materialize, the appreciation case will weaken.

  Comparison

  In 2010-11 the RMB appreciated 7.8% versus the USD, and in 2017 it appreciated 6.7%; the report argues the current macro backdrop is similar.

  Risks

  A pullback in external demand, weaker-than-expected domestic demand recovery, continued monetary easing, a stronger USD, or shifts in capital flows.

• China interest rates / 10-year government bonds

  Transmission variable for policy and growth expectations

  Strengths

  If domestic demand is driving the import surge, a rebound in growth and inflation could make it difficult for rates to stay near historic lows.

  Weaknesses

  As of the first four months of 2026, 10-year government bond yields were still around 1.8%, and the central bank had not raised rates.

  Comparison

  In 2017, 10-year government bond yields rose from 3.1% to 3.9%, accompanied by higher open-market operation rates from the central bank.

  Risks

  Insufficient inflation recovery, continued policy easing, or an unstable property-market recovery could all cap upward pressure on rates.

• Gold

  Asset related to the import surge

  Strengths

  China's precious metals imports surged sharply, which the report sees as having a fairly clear positive implication for gold prices.

  Weaknesses

  The report says the implication of gold imports for the RMB is still unclear.

  Comparison

  Q1 2026 precious metals imports rose 260% YoY to USD 66bn, a rare new trend in China's recent history.

  Risks

  A cooling in gold consumption or savings demand, changes in the USD and real rates, or shifts in central bank and emerging-market gold-buying pace.

• AI-related products and semiconductor equipment

  An important source of import growth

  Strengths

  AI-related products accounted for about 40% of Q1 import growth, and global data-center investment and AI demand are still accelerating.

  Weaknesses

  These imports may be inventory-cycle driven; if end demand slows, pre-stocking could ease.

  Comparison

  The chart shows semiconductors and computers were among the largest contributors to Q1 2026 import growth.

  Risks

  A slowdown in global AI capital spending, a semiconductor cycle reversal, trade restrictions, or supply-chain disruptions.

Key data

• Export growth in the first four months of 202615% YoYChina's exports have remained strong since the start of the year.
• Import growth in the first four months of 202623% YoYImport growth was 8 percentage points faster than export growth.
• Trade surplus as a share of GDP1.4%The trade surplus as a share of GDP in the first four months of 2026 was 0.2 percentage points lower than in the same period last year.
• Q1 import incrementUSD 132bnAbout 40% came from AI-related products, and about 30% from traditional upstream inputs.
• End-2026 RMB forecast6.55/USDRaised from the prior forecast of 6.7/USD.
• End-2027 RMB forecast6.3/USDThe report keeps its original end-2027 forecast.
• Expected RMB appreciation in 20266.3% versus the USD; about 5% versus a basket of currenciesThe report says this could be one of the strongest years for RMB performance in the past two decades.
• Precious metals importsQ1 2026 up 260% YoY to USD 66bnContributed roughly one-third of total import growth; the report says the implication for the RMB is still unclear, but the implication for gold prices is more obvious.

Impact & implications

The main implication for asset pricing is that the RMB still has room to strengthen further, and the market should not turn bearish on the RMB simply because the short-term trade surplus has narrowed. If external demand keeps improving, exporter FX conversion and a wider surplus will support the exchange rate; if domestic demand recovery is stronger, higher expectations for rates and liquidity will also support the RMB. At the same time, the sharp rise in gold imports suggests that Chinese household consumption and saving behavior may be changing, which could strengthen the medium- to long-term demand narrative for gold.

Risks

• If the import surge is mainly a one-off inventory restock rather than sustained external-demand or domestic-demand improvement, the RMB appreciation case may weaken.
• If global AI, data-center, or electric-vehicle demand slows, subsequent export orders may fall short of expectations.
• If signs of recovery in fixed-asset investment, manufacturing profits, or property stability do not persist, the domestic-demand recovery path may be delayed.
• A stronger USD, changes in capital flows, or external political and regulatory shocks could weigh on RMB performance.
• Changes in oil prices, gold imports, and commodity prices may distort import values and trade-surplus interpretation.

What to watch

• Whether China's export-order PMI continues to rise.
• Whether strong import growth spreads beyond AI and upstream inputs into a broader range of categories.
• Whether the trade surplus as a share of GDP keeps narrowing or starts widening again.
• Whether PPI stays in positive territory and whether any recovery in inflation prompts a repricing of monetary policy.
• Changes in 10-year government bond yields, interbank liquidity, and PBOC open-market operation rates.
• Exporter FX conversion behavior and the RMB's performance versus the USD and versus a currency basket.
• Whether precious metals imports keep growing rapidly and how that affects gold prices.