China’s exports jumped 23.9% in July, beating forecasts as AI-driven demand boosted high-tech shipments. But a growing trade surplus is fuelling concerns among global trade partners
China’s exports continued to defy expectations in July, powered by strong global demand for high-tech products linked to the artificial intelligence (AI) boom. But the export-led strength is also deepening concerns among trading partners over Beijing’s growing trade surplus and dependence on external demand for economic growth.
Exports from the world’s second-largest economy rose 23.9 per cent year-on-year in July in US dollar terms, according to customs data released on Friday. The growth, while slower than the 27 per cent jump recorded in June, exceeded the 22.2 per cent increase forecast by economists in a Reuters poll.
Imports also remained strong, rising 27.5 per cent from a year earlier. The increase followed a 36 per cent surge in June and was broadly in line with market expectations of a 27.9 per cent rise.
China’s trade surplus narrowed slightly to $112.5 billion in July from $125.62 billion in June, but remained elevated, highlighting the economy’s continued reliance on exports at a time when domestic consumption and investment remain weak.
AI boom lifts China’s high-tech exports
A major driver of China’s export performance has been demand for advanced manufacturing products, particularly those linked to AI infrastructure.
Exports of semiconductors nearly doubled in value terms compared with the previous year, while shipments of high-tech products increased 40.7 per cent, customs data showed.
More from BusinessThe surge reflects a broader global push to expand AI capabilities, with companies and governments investing heavily in data centres, computing infrastructure and advanced electronics.
However, the gains have been uneven across China’s manufacturing sector. While high-tech industries have benefited from the AI-led demand cycle, traditional industries continue to face pressure from weak global and domestic demand.
Exports of ceramics, for instance, declined 28.3 per cent in July, underscoring the divide between China’s advanced manufacturing sectors and more traditional industries struggling with overcapacity.
China’s growth model faces fresh challenges
China’s economy has increasingly relied on manufacturing and exports to offset weakness in domestic consumption and the prolonged downturn in the property sector.
The economy grew 4.7 per cent in the first half of 2026, keeping it broadly on track to meet Beijing’s annual growth target of 4.5-5 per cent. However, growth slowed to 4.3 per cent in the second quarter as weak household spending and investment weighed on momentum.
Beijing’s top policymakers have acknowledged the need to shift towards new sources of growth, with officials calling for faster development of emerging industries and a transition away from traditional growth drivers.
But strong export performance could reduce pressure on policymakers to accelerate measures aimed at boosting household incomes and strengthening social security systems, analysts said.
Macquarie analysts said Beijing’s support for domestic consumption and the property market could remain limited as long as exports and manufacturing continue to support overall economic growth.
Rising trade tensions threaten export momentum
China’s expanding trade surplus has become a source of friction with major trading partners.
The country’s surplus is expected to exceed $1 trillion for the second consecutive year, raising concerns among other economies that Chinese manufacturers are exporting excess capacity and putting pressure on domestic industries.
The European Union has been considering tougher measures to address its widening trade imbalance with China, while Beijing’s trade relationship with Washington has also come under renewed strain ahead of an expected leaders’ summit in September.
With global uncertainty rising due to geopolitical tensions, including the Iran war, trading partners could become more willing to impose protectionist measures, increasing risks for China’s export-driven growth model.
Energy imports signal domestic weakness
Despite strong exports, China’s demand for key commodities has shown signs of weakness.
Imports of natural gas fell 3 per cent during the first seven months of 2026, while crude oil imports declined 13.2 per cent, according to customs data.
The decline reflects softer domestic demand and continued challenges in China’s property and investment sectors.
For now, China’s factories remain a key pillar of growth, with AI-related manufacturing providing fresh momentum. But the country’s reliance on overseas demand could become a vulnerability if trade tensions intensify and global markets turn more protectionist.
