China’s July exports beat expectations on robust high-tech demand fuelled by global AI boom
Exports of semiconductors almost doubled in value terms from 2025
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[BEIJING] China’s exports beat expectations in July, remaining a key driver of economic growth as the global AI infrastructure boom fuelled demand for high-tech goods and exporters rushed shipments ahead of higher US tariffs.
The manufacturing powerhouse has been relying on external demand to sustain growth amid tepid domestic consumption and an investment downturn, but that reliance also exposes risks, as trading partners may step up protectionism in an uncertain global environment due to the Iran war.
China’s exports expanded 23.9 per cent year-on-year in US dollar value terms in July, customs data showed on Friday (Aug 7), slowing from a 27 per cent surge in the previous month and compared with a 22.2 per cent rise forecast in a Reuters poll.
“External demand has become increasingly important this year for the growth outlook as China’s K-shaped divergence widens,” said Lynn Song, chief Greater China economist at ING.
Imports were up 27.5 per cent from July 2025, slowing from the 36 per cent jump in June and were in line with an expected 27.9 per cent gain.
Resilient demand for AI-related products
Analysts expect AI demand, which drove up the prices of related goods, to underpin strong export growth in the third quarter or even the entire second half, while some cautioned that China’s tensions with trading partners might be heating up.
Exports of semiconductors almost doubled in value terms from 2025, and overall high-tech products exports expanded 40.7 per cent, customs data showed.
Ceramic shipments slumped 28.3 per cent and the exports of toys fell 9.7 per cent, in a further sign of the economy’s uneven development where advanced manufacturers ride the AI boom but more traditional industries struggle due to subdued demand.
The Chinese yuan rose against the US dollar on Friday, hovering near a 3½-year high.
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In a meeting late in July, China’s top decision-makers called for a faster transition from old growth drivers to new ones, signalling priority on high-tech sectors.
China’s economy grew 4.7 per cent in the first half of 2026, keeping it broadly on track to meet Beijing’s official full-year growth target of 4.5 to 5 per cent, but growth slowed to 4.3 per cent in the second quarter as weak consumption and investment clouded strong manufacturing and exports.
Exports of cars rose more than 50 per cent in both value terms and quantity, driven by Chinese automakers’ aggressive expansion abroad as domestic demand remained subdued.
China’s imports of natural gas dipped 0.9 per cent from a year earlier in July, while crude oil dropped 24.3 per cent on high prices and supply constraints.
Ties with trading partners
China’s trade surplus narrowed to US$112.5 billion from US$125.62 billion in June. Its trade surplus with the US narrowed slightly to US$28 billion in July from US$28.86 billion in June.
Exports to the US rose 17 per cent from the same month in 2025. Outbound shipments to the European Union rose 16 per cent, while imports from the bloc dropped 1.4 per cent. Trade with South Korea maintained robust growth in July, with exports up 46.6 per cent and imports up 97.8 per cent, on high-tech demand.
Chinese exporters and US importers continued to frontload shipments in July as they expected Washington’s tariffs on Chinese goods to go up after the expiry of a 10 per cent temporary global levy in late July, said Xu Tianchen, a senior economist at the Economist Intelligence Unit.
In July, the US imposed a new 12.5 per cent tariff on Chinese imports after the 10 per cent levy expired, part of a broader tariff campaign targeting trading partners Washington says have failed to curb forced labour. A separate US investigation into trading partners’ excess capacity will likely raise tariffs further.
Chinese officials have repeatedly pledged to expand imports and promote balanced trade, yet the country’s trade surplus, on track to top $1 trillion for a second year, continued to unnerve trading partners concerned about disruptions to their own domestic industries.
The European Union has been weighing tougher measures to curb its trade deficit with China, while Beijing’s ties with Washington have shown signs of strain as they hit each other with trade restrictions and other measures ahead of an expected leaders’ summit in September.
With exports booming and factories humming, policymakers may feel more comfortable delaying policies to boost household income and strengthen social security systems to address entrenched weakness in domestic demand.
Macquarie analysts said Beijing’s policy support for domestic consumption and the property market would remain restrained as long as exports and manufacturing could help the economy achieve policymakers’ annual growth target. REUTERS
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