China’s exports surge as demand for high-tech, AI help prop up economic growth

BEIJING – China’s export growth quickened in August, buoyed by strong overseas appetite for high-tech and AI-related products, providing vital support for an economy weighed down by sluggish domestic demand.

The divergence between resilient exports and weak activity at home highlights Beijing’s continued dependence on foreign demand, with policymakers struggling to revive consumption and investment as they pursue a 4.5 per cent to 5 per cent growth target in 2026.

Exports expanded 25 per cent year on year in August in US dollar terms, matching forecasts and accelerating from the 23.9 per cent growth in the previous month, Customs data showed on Sept 8.

Imports soared 28.2 per cent, compared with a 27.5 per cent year-on-year increase in July and a forecast for a 30 per cent rise.

Lynn Song, ING’s Greater China chief economist, said that while external demand had significantly outpaced domestic consumption, “tariff risks and the durability of the tech investment cycle are the key factors to watch to see how long this strength will persist”.

In the first eight months, exports of high-tech products rose 42.9 per cent in US dollar value terms.

Semiconductor export values more than doubled even as volumes edged up just 4.1 per cent, while car exports rose more than 50 per cent in both value and volume.

Strong demand for AI products, as well as electric vehicles, solar cells and lithium-ion batteries offset the impact from weather events, said Zhaopeng Xing, ANZ’s senior China strategist.

Xing noted that companies were still rushing to send goods to the US because of tariff uncertainties.

“The main areas of import growth still look tied to tech products, showing China continues to spend in the ongoing tech race,” ING’s Song said.

China’s push to dominate key technologies has turbocharged investor appetite for tech stocks, while surging AI-related demand is lifting a new generation of manufacturers.

Chipmaker CXMT swung to a first-half profit in its maiden earnings report since listing, as soaring memory chip prices and strong demand for AI-driven computing lifted sales.

Industries relying on the domestic market, however, have been grappling with producer price inflation and soft demand.

Relying on outbound shipments to absorb industrial capacity also exposes China to risks of curbs from trading partners, as the United States and the European Union have both demanded Beijing lower its trade surpluses.

China’s trade surplus rose to US$119.09 billion (S$151 billion) in August, expanding from US$112.5 billion the previous month.

The surplus in the first eight months reached US$805.51 billion, putting the annual number on track to top US$1 trillion for the second year.

The trade surplus with the US rose to US$29.18 billion from US$28 billion in July, with China’s exports to the US jumping 34.4 per cent year on year, outstripping the 17.8 per cent growth in imports.

A trade truce between Beijing and Washington, reached in late 2025 when the two countries’ presidents met, has held despite on-and-off frictions.

The two governments are now exploring reciprocal tariff cuts on US$30 billion worth of goods from each side as they prepare for another summit later in September.

China’s exports of rare earths in August rose month on month in volume, but held well below the year-to-date monthly average. Crude oil imports, meanwhile, dropped 23.4 per cent year on year in volume terms.

The trade data barely moved markets, leaving the yuan flat and stocks slightly higher as traders awaited US inflation data for fresh signals on the Federal Reserve’s rate path.

Dependence on external demand

After growth cooled to 4.3 per cent in the April to June period, economic data released in August showed industrial output and retail sales both slowed at the start of the third quarter, while fixed-asset investment recorded a sharper decline in the first seven months.

The property market, once a major growth driver, is still in a years-long downturn.

Premier Li Qiang, the country’s No. 2 leader, in August called for efforts to stabilise external demand and expand international trade cooperation while acknowledging insufficient domestic demand, hardships facing industries and companies, as well as rising uncertainties in international environment.

The government has stepped up fiscal support for the economy, including deploying an 800 billion yuan (S$151 billion) financing tool to shore up infrastructure investment.

But the strength in exports relieves Beijing of immediate large-scale actions to boost household income, improve job security and revive the property market to effectively elevate domestic consumption.

“The latest trade data do not materially strengthen the case for an imminent interest rate cut,” said Hao Zhou, a Hong Kong-based analyst at Guotai Haitong Securities.

“While further policy support cannot be ruled out, the combination of resilient external demand, steady industrial momentum, and increasingly targeted fiscal measures implies that the timing and necessity of additional monetary easing will require further observation.” REUTERS