China’s Exports Rise 23.9% YoY as Chip Demand Surges

China’s exports rose 23.9% in July from a year earlier, beating analyst forecasts. A worldwide buildout of artificial intelligence (AI) infrastructure lifted demand for the country’s chips and high-tech goods.

The gains kept the world’s second-largest economy on track through a year of trade shocks. Yet, they also highlight the split between booming factory exports and weak domestic spending.

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AI Chip Boom Powers China’s Export Surge

China’s exports rose 23.9% year over year in dollar terms in July, slightly ahead of economists’ expectations. Reuters-polled analysts had forecast a 22.2% increase, while a separate Bloomberg survey projected a median gain of 23%. 

Although exports beat estimates, growth eased from June’s 27% jump, which marked the strongest expansion since October 2021.

Imports increased 27.5% during the month. Meanwhile, China’s trade surplus totaled $112.5 billion, above market expectations of roughly $107 billion but lower than June’s $125.6 billion.

Semiconductors drove much of the strength. China’s integrated circuit exports, measured by value, nearly doubled over the first seven months of the year. In July alone, chip shipments climbed 117% from a year earlier. 

Mechanical and electrical products made up more than 60% of shipments over the first seven months. Electric vehicles, lithium batteries, and wind power equipment drove the demand. Industrial robots and 3D printers also grew quickly.

Price Gains Mask Softer Volumes and Weak Domestic Demand

Not all of the export strength reflects higher shipment volumes. Rising prices also flattered the figures. 

A shortage of chips and electronics has pushed some prices up as much as 700% over the past year. Higher oil costs and surging metal prices lifted the value of trade beyond the actual volume shipped.

Moreover, the export strength has masked weakness at home. China’s economy grew 4.3% in the second quarter, its slowest pace since late 2022. Retail sales edged up just 1% in June, a sign of soft consumer demand. 

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