China exports in July beat forecasts on robust high-tech demand

China's exports surged 23.9 per cent in July year-on-year, exceeding forecasts and demonstrating a robust demand for high-tech goods, according to customs data released on August 7. The growth marked a deceleration from the previous month's 27 per cent surge, but still outpaced the 22.2 per cent growth predicted by a Reuters poll.

Semiconductor exports nearly doubled, while high-tech product exports increased by 40.7 per cent. However, ceramics exports declined 28.3 per cent, highlighting the uneven nature of the economy where advanced manufacturers thrive in the AI era, but more traditional sectors grapple with limited demand. In late July, China's top decision-makers called for a faster transition from traditional growth drivers to newer sectors, signaling a priority on high-tech industries.

Despite the strong export performance, the economy grew at a slower 4.7 per cent in the first half of 2026, compared to the official target of 4.5 to 5 per cent. The trade surplus narrowed to US$112.5 billion from US$125.62 billion in June. Chinese officials have emphasized their commitment to expanding imports and promoting balanced trade, but the country's persistent trade surplus has raised concerns among trading partners about potential disruptions to their domestic industries.

The European Union is considering stricter measures to reduce its trade deficit with China, while China's relationship with the United States has become increasingly strained due to ongoing trade restrictions and other measures. With exports driving the economy, policymakers may be more inclined to postpone initiatives aimed at boosting domestic consumption and strengthening social security systems to address the ongoing weakness in domestic demand.

Macquarie analysts believe that Beijing's policy support for domestic consumption and the property market will remain limited as long as exports and manufacturing can help the economy meet its annual growth target.