China's H1 trade tops 25 trillion yuan as exports power 16.9% growth

China's foreign trade exceeded 25 trillion yuan in the first half of 2026, rising 16.9% from a year earlier, as AI-driven demand and front-loaded shipments to the US offset persistent weakness in domestic consumption.

China's foreign trade surpassed 25 trillion yuan in the first half of 2026, rising 16.9% from a year earlier, as export strength from AI-related demand and pre-tariff front-loading masked a deepening divergence between technology-driven shipments and the broader economy.

"The trade data shows external demand, not domestic rebalancing, is still doing the heavy lifting for China's economy," said Zhang Ming, chief economist at China Industrial Securities. "The gap between semiconductor exports and categories like furniture tells you where the real demand is concentrated."

June exports likely grew 18.2% year-on-year, cooling from May's 19.4% pace, according to a Reuters poll of 20 economists. Imports are expected to have risen 24%, slowing from 27.4%, with South Korean export data — a proxy for Chinese import demand — suggesting the strength is concentrated in semiconductors rather than a broad-based domestic recovery. The trade surplus is forecast to widen to $120.60 billion from $105.43 billion in May. Forecasts ranged widely, from 20% growth expected by BNP Paribas and Mizuho Securities to as low as 12% from more cautious Chinese domestic houses.

The data feeds into a broader question for policymakers ahead of Wednesday's Q2 GDP release: whether recent strength reflects a genuine recovery or simply borrowed demand ahead of tariff deadlines. China's 2026 growth target of 4.5% to 5% leaves limited room for disappointment, reinforcing the case for further fiscal support if external demand softens.

The divergence within the trade data is stark. Exports of automated data processing equipment jumped 60% in value terms in May, while furniture shipments grew just 1.9%, according to the latest customs data. Global AI investment is providing a critical buffer for China's $20 trillion economy, helping manufacturers withstand mounting pressures from Middle East conflict-related disruptions and a prolonged property downturn.

US retailers brought forward orders by four to six weeks to stock up for Black Friday and Christmas sales ahead of expected tariff hikes later this year, shipping companies said. However, uncertainty remains high after President Donald Trump's May visit to Beijing failed to deliver the breakthroughs many had hoped for. The previous escalation in tariffs — when the US raised levies on $300 billion of Chinese goods — reduced bilateral trade by roughly 15% over the following six months, according to Census Bureau data.

The trade surplus widening to a projected $120.60 billion in June puts renewed focus on USD/CNY dynamics. A larger surplus typically supports the yuan, but persistent capital outflows and expectations of further PBoC easing have kept the onshore yuan under pressure. The CSI 300 has gained 4.2% over the past month, partly on hopes that strong trade data could reduce the urgency for aggressive stimulus, though property-sector weakness continues to weigh on sentiment.

China will publish its Q2 GDP figure on Wednesday. The economy grew 5.1% in the first quarter, beating expectations, but has since lost steam. Exports helped China outperform in early 2026, but sluggish domestic demand leaves growth increasingly exposed to any softening in external markets.

This article is for informational purposes only and does not constitute investment advice.