China’s exports and imports expanded rapidly in May, topping forecasts as a global investment supercycle in artificial intelligence (AI) drives up prices and demand for hardware made by the world’s manufacturing powerhouse.
Exports jumped more than 19% from a year earlier, the most in three months and higher than all but one estimate in a Bloomberg survey. Imports soared over 27% in May, according to data released by the General Administration of Customs on Tuesday, leaving a trade surplus of US$105.4 billion (RM428.19 billion) — the biggest since January.
Chips and computers contributed to about half the growth in both exports and imports, Bloomberg calculations showed. Overseas sales of semiconductors soared 111% to US$36 billion, the fastest expansion since 2013.
The strong export growth “suggests continued support from AI-related hardware demand and possibly some front-loading of overseas orders amid geopolitical uncertainty”, said Hao Zhou, chief economist at Guotai Junan International Holdings. “Strong export performance is providing a meaningful buffer to domestic softness.”
The global AI infrastructure buildout has emerged as a key force propelling Asian trade this year, cushioning the impact of a global energy crisis stemming from the conflict in the Middle East. It’s leading to a huge windfall for companies like the South Korean giant Samsung Electronics Co as well as lesser-known Chinese hardware suppliers such as Zhongji Innolight Co, a maker of optical modules critical to data centres.
Outbound shipments of computers and parts soared 66% in May from a year ago, the fastest pace since 2010 and up from a 47% gain in the previous month. High-tech exports climbed 51%, the most since 2021.
Much of the surge came as a result of soaring chip prices at a time when a global race among tech giants to build data centres is leading to a shortage that could last for years. In volume terms, China’s chip exports rose only 2%.
In another sign of the impact from the AI rush on the world’s No 2 economy, South Korea’s semiconductor exports to China jumped over 200% in May from a year earlier. China still relies on imported chips as restrictions imposed by the US block its access to many of the machines needed to make advanced semiconductors.
Apart from AI hardware, car exports continued to post solid growth at nearly 40%. Automakers have no choice but to step up efforts to sell overseas, as domestic sales plunged 22% in May from a year ago in the sixth straight month of double-digit declines.
Exports to the US rose almost 36% — the most since 2021 — extending their recovery after a long streak of double-digit declines during the tariff war started by Donald Trump. The increase may have been exaggerated by the statistical effect of a low base from a year ago, when China and the US were locked in tit-for-tat tariff hikes that at one point brought levies to over 100%.
Export growth accelerated across most major regions in May, with the exception of the European Union and Latin America. Shipments to the Southeast Asian nations in the Asean group soared nearly 25% and climbed almost 19% to Africa.
Though China’s sales in the EU expanded less than 8%, its imports from the bloc shrank for the first time in three months, meaning the trade surplus actually grew slightly and remained above US$30 billion in May.
The imbalance will do little to soothe trade tensions with Europe. Officials there are preparing the ground for possible new tools to counter China’s export surge, which they partly blame on insufficient domestic demand, an undervalued currency and generous subsidies.
Back home, the AI boom is driving K-shaped expansion across China’s trade, factory production and industrial profits. In contrast to high-tech exports, overseas sales of traditional items like clothes and toys declined by 4% and 7% in May, respectively.
The divergence complicates China’s economic policymaking, as a large portion of the economy is still suffering from anaemic consumer demand, even as some factories in AI-related fields prosper.
The export strength is potentially making Chinese authorities more comfortable with a stronger yuan. In contrast to labour-intensive products, high-tech exports are less sensitive to domestic currency appreciation.
With the cost of oil, chips and metals sharply on the rise, China’s export prices jumped at their fastest rate in three years in April, a reversal from years of an almost-unbroken contraction. But such increases have yet to spread to most Chinese goods, suggesting intense domestic competition still limits what factories can charge buyers.
And despite being the world’s biggest oil importer, China is buying far less crude from abroad, with inbound shipments falling 5% in the first five months of 2026 from a year ago in volume terms.
“The external demand engine remains one of China’s key drivers,” said Lynn Song, chief economist for Greater China at ING Bank NV. “Domestic demand, though, continues to lag behind.”
Source: theedgemalaysia