China’s exports grew at a faster pace in May, driven by strong overseas demand for semiconductors, automobiles and other advanced technology products that are benefiting from the global artificial intelligence boom.
The stronger export performance has provided some support to policymakers as higher energy prices linked to the Iran conflict put pressure on broader economic demand.
Strong Demand Masks Emerging Signs of Slowdown
The worldwide surge in AI-related investment has helped the world’s largest manufacturing nation cushion the impact that many analysts expected from instability in the Middle East.
However, there are indications that inventory stockpiling triggered by rising energy costs is beginning to ease, as prices climb and overseas buyers gradually reduce existing stock while awaiting a potential ceasefire.
Exports expanded 19.4% from a year earlier in U.S. dollar value terms, customs data showed on Tuesday, outpacing the 14.1% gain in April and a 15% rise tipped by economists.
Imports notched another strong month, climbing 27.4% versus a rise of 25.3% a month prior. Economists had forecast growth of 25%.
Trade Imbalances
The AI boom has boosted demand for semiconductors and advanced electronics, supporting China’s export growth. However, signs of slowing momentum are emerging, with May factory data showing a sharp decline in new export orders after April’s two-year high.
While strong exports helped China’s economy outperform expectations in the first quarter, weak domestic demand continues to raise concerns. Beijing is facing increasing international pressure to boost consumption, amid criticism that its export-led model and industrial subsidies are distorting global trade.
The Organisation for Economic Co-operation and Development recently reported that subsidies account for nearly 60% of Chinese firms’ market-share gains, while a study by the Federal Reserve System found China’s trade surplus remains historically high.
Although talks between Donald Trump and Xi Jinping helped ease tensions, they produced little progress on trade disputes. China’s trade surplus widened to $105.43 billion in May from $84.8 billion in April.
(With inputs from Reuters)
