On Friday, the China's National Bureau of Statistics released december 2021 export data that increased 20.9 percent year-over-year. That was higher than the forecast of a 20% rise. 

However, this figure is lower than the 22% growth in November. The China's exports are largely supported by shipments to the U.S. and Europe.

They are the two regions that have been China's main trading partners. In addition, the shipments of Chinese products to the Southeast Asian region rose as much as 12% to $49.76 billion.

People expect China's export trend to remain strong in the first quarter of 2022 due to increasingly resilient global demand. That despite a surge in COVID Omicron cases in many developing countries as it was said by Zhang Zhiwei, a Chinese trade official. Is it possible to happen?

The Import Growth Decline, Market is Worrying the Economic Prospect

The increase in China's exports is apparently invisible on the import side. The Shipments of goods from abroad increased only by 19.5 percent on an annualized basis in December. 

This figure is lower than the expectations of a 26.3% increase, while being much slower than the previous period's growth of 31.7%. How about the data released?

Referring to this afternoon's export-import data, the China's trade balance increased from $71.72 billion to $94.46 billion in December. This change is more due to the volume of imports that fell dramatically.

The emergence of the latest variant of COVID, a global supply chain that is not yet normal, and high inflation throughout 2021, making China's trade expected to face many challenges this year.

Trading is Still Uncertain and Not Stable in 2022

For 2022, trade faces growing uncertainty, instability, and imbalances. China's economy is facing pressure from the three directions. These are including a contraction in demand, faltering supply, and a bleaker outlook. That opinion was said by Li Kuiwen, a chinese customs spokesman.

Even so, Li Kuiwen is optimistic that in the face of these challenges and difficulties, the domestic economy is still quite resilient. Furthermore, fundamentals will remain positive in the long run.

Elsewhere, The U.S. dollar index (DXY) fell for the four straight days to reach a low of 94.62 in the middle of the European session (January 14). It is caused by one thing.

Why the Dollar Slipped Down

The Market participants were initially suspected the depreciation of the dollar. Everything was related to the hawkish stance of the U.S. Federal Reserve.

That was already fully accounted for in the greenback exchange rate. However, some analysts think the Fed's Quantitative Tightening (QT) plan may also be contributing to the weakening of USD this week.

Quantitative Tightening discourse came to the fore in the minutes of the DECEMBER 2021 FOMC meeting. QT policy is the opposite of Quantitative Easing (QE). 

The implementation of QE means the central bank carries out the purchase of bonds and other securities to increase the money supply. It is usually to boost the rate of inflation and excite the economy.

QT is Suitable for Cooling the Inflation 

QT means that the central bank stops reinvestment of maturing securities, or even begins to carry out the bond sales ("streamlining the central bank's balance sheet").

QT is a suitable policy to "cool" inflation growth that is too rapid. In this case, QT is part of the central bank's tightening of monetary policy and the end goal is about the same as a rate hike.

For the Federal Reserve, the push to raise interest rates is likely to ease if QT has been enacted. In fact, market participants are already obsessed with the potential for an ambitious "Fed rate hike.

Some analysts think that the gap is likely to have underpinned the recent dollar sell-off. Quantitative Tightening is not necessarily bearish for the U.S. dollar rate.