China’s exports surged in May, AI chip demand propelled growth

A spike in chip and auto shipments boosted May exports, but rising energy costs and inventory draws hint at a possible slowdown ahead. Beijing, June 9 – China’s May export growth accelerated, fueled by demand for chips, automobiles, and other high-tech goods, supporting a global AI investment boom and bringing some relief to policymakers amid rising energy prices due to the conflict with Iran. The surge in global AI investments has helped the world’s leading manufacturing powerhouse offset the expected hit from turbulence in the Middle East. However, signs are emerging that demand momentum may slow as energy costs rise: prices are climbing, and foreign buyers are starting to unwind stockpiles, anticipating a ceasefire. Exports rose 19.4% year on year in dollar terms, according to customs data, surpassing the 14.1% rise in April and economists’ expectations of around 15%. Imports also showed strong growth, rising 27.4% year on year, while a month earlier the increase was 25.3%. Economists were expecting around 25% growth. Rising chip prices continue to support exports; memory prices rose by 20% from the previous month, leading to a 111% month-on-month increase in integrated circuit exports. – Xing Zhaopeng, Senior China Strategist at ANZ Exports of automated data-processing equipment jumped 66.1% year on year in dollar terms, high-tech products rose 50.9%, and vehicle shipments rose 39%, according to the data. We shall see – the AI story is far from over – chips are rewriting China’s trade landscape. – Xing Zhaopeng The AI boom has spurred demand for semiconductors that power data centers and advanced electronics, leveraging the strengths of China’s manufacturing sector. However early signals suggest momentum may start to soften. Separate May data on manufacturing activity also indicated a sharp drop in new export orders compared with the peaks seen two years ago, when demand was at its height. Strong exports supported China’s economy, worth about $20 trillion, beating forecasts in the first quarter, but signs of slowing momentum underline risks to weaker domestic demand and the need for further policy support. Beijing is coming under increasing international pressure to boost domestic consumption, as critics argue that excessive reliance on imported components and a reshuffling of production complicate other developing countries. An OECD review last week highlighted this concern, noting that almost 60% of the growth in market share of Chinese companies can be explained by subsidies received. A new study by the U.S. Federal Reserve shows that China’s trade balance relative to world GDP has exceeded 1% and remains sizable with no clear signs of diminishing. This implies that prolonged Chinese industrial overproduction could continue shaping global production for many years. Last month, a meeting between U.S. President Donald Trump and Chinese President Xi Jinping cooled tensions, but did not yield substantive breakthroughs in trade and economic cooperation. China’s overall trade balance for May stood at $105.43 billion, compared with $84.8 billion in the previous month and with expectations of $92.1 billion. Outlook and External Challenges External demand is currently supporting exporters, but rising energy costs and geopolitical tensions could dampen growth. The government continues to seek a balance between stimulating domestic demand and supporting production, facing increasing competition in the global high-tech market. The coming months may provide new data on demand for Chinese equipment and the country’s participation in global supply chains. At the same time, it will be important to monitor semiconductor production pace and changes in energy costs that affect global demand. In conclusion, May’s export growth demonstrates the resilience of Chinese manufacturing and its sensitivity to global AI and high-tech trends. The question remains how long this wave of demand will last and what steps China will take to support domestic consumption and maintain competitiveness in global markets.