J curve effect, Monetary Tightening Behind Bigger Chinese Surplus
Ironically, this comes after a period when the yuan has been appreciating in value against most currencies (particularly the euro), while the previous drop coincided with a depreciation of the yuan against most currencies.
Does that mean that conventional wisdom got it all wrong and that a stronger currency increases net exports and that a weaker currency decreases it? No, not in the long run. In the long run, a stronger currency should all other things being equal reduce a trade surplus (though the effects are often exaggerated). But the short term effect of a stronger currency could in fact be to increase the trade surplus because of the J curve effect.
The J curve effect from the weaker euro was similarly probably a factor behind the drop in the German trade surplus in May.
Another explanation is the increase in reserve requirements and other tightening measures that Chinese authorities have implemented to limit bubbles and malinvestments. Monetary tightening will decrease import demand, and therefore increase the trade surplus.