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UOB economist Ho Woei Chen reports that China's robust exports and imports in early 2026 are driving economic growth, with a noticeable shift in trade focus from the US to ASEAN, EU, and regional partners. This diversification reflects China's strategic adjustment to mitigate risks from geopolitical tensions and trade imbalances with the US. The report highlights increased trade volumes with Southeast Asia and the EU, signaling stronger economic ties in these regions. For markets, this shift could impact USD/CNY dynamics as reduced US-China trade dependency may weaken the yuan's pressure against the dollar. Traders should monitor trade data from China's new partners and policy responses from the US. The report also underscores potential volatility in Middle East markets due to rising regional tensions, which could indirectly affect global supply chains. Looking ahead, investors should track China's trade negotiations with ASEAN and EU partners, as well as any retaliatory measures from the US. The evolving trade landscape may create opportunities in emerging markets while posing risks to US-centric portfolios. Central banks in the Gulf may need to reassess their exposure to China's trade-driven growth.
