Asia week ahead: Bank of Korea rate decision, key data on China and India

CNY at a glance: what next as the yuan moves below the critical 7.00 threshold?

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China’s December trade data will be the highlight of an otherwise quiet week in Asia’s biggest economy. We expect export growth to slow slightly at year-end to 3.0% year on year, reflecting front-loading effects from last year. Imports could also lag slightly at -1.6% YoY. After already eclipsing the $ 1tn mark in November, we expect the full-year trade surplus to be near $1.2tn, driven by a $118.9bn trade surplus in December.

India’s consumer price inflation is expected to edge higher in December as favourable base effects diminish, and the impact of elevated gold and silver prices becomes more pronounced. Nevertheless, price pressures appear contained, with headline inflation likely to remain around 1.4% YoY. This would strengthen the case for the Reserve Bank of India to maintain its accommodative stance and consider additional rate cuts.

Separately, December trade data is expected to reflect a continued, albeit modest, improvement in the trade deficit. Our projection for further narrowing is primarily driven by lower crude oil prices and incremental export gains. Yet these benefits are likely to be partially offset by higher gold imports.

The Bank of Korea is likely to keep its 2.5% policy rate unchanged on Thursday. While the IT sector's strength offers upside, the BoK remains cautious due to a weak KRW, inflation concerns, housing price pressures, and heightened geopolitical risks. These factors underscore uncertainty about future growth. While the overall dovish stance is expected to persist, a K-shaped recovery may pose challenges for the BoK. Meanwhile, the unemployment rate is anticipated to increase as most government job programmes ended in November or December. Recent business surveys suggested job growth within manufacturing, but services and construction are likely to remain weak.