China’s Trade Boom Survives Extreme Rains as AI Lifts Demand

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(Bloomberg) — China’s exports and imports managed to ride out the disruptions caused by extreme weather in July, as a global investment supercycle in artificial intelligence powers tech demand overseas and at home.

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Shipments abroad climbed more than forecast and grew 23.9%, their second straight month of gains in excess of 20%, according to data released by the General Administration of Customs on Friday. Imports advanced 27.5%, leaving a trade surplus of $112.5 billion and putting it on track to exceed last year’s record level.

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“The strong outturn came despite typhoon-related disruptions at major ports,” Barclays Plc analysts led by Yingke Zhou said in a report. “AI-related and green-tech exports continue to benefit from the global AI investment cycle and energy transition, but weakness in labor-intensive exports continues to weigh on the job market and consumption.”

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After absorbing the shocks of Donald Trump’s tariffs and the war in the Middle East, the world’s biggest manufacturing nation is pulling through a period of heavy rains. Typhoon Bavi became the strongest storm to hit the powerhouse economy of Zhejiang province in nearly eight decades and some of the country’s busiest ports suspended operations temporarily.

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Soaring overseas shipments for AI-related electronics as well as other cutting-edge products like electric vehicles have cushioned growth from a deeper slowdown this year. 

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At the same time, the boom in trade is widening a persistent divide within the economy and reducing the need for Chinese officials to step up support to domestic consumers despite weak demand at home.

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“Exports remain the main growth engine,” said Lynn Song, chief economist for Greater China at ING Bank NV in Hong Kong. “This year’s K-shaped divergence in China looks like it will continue in the months ahead as external demand is clearly much stronger than domestic demand.”

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What Bloomberg Economics Says …

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“China’s trade data continue to show a widening divide between the old and new economies. Robust import and export growth in July demonstrated the strength of tech-related manufacturing, while exports of traditional products lagged well behind the headline pace. We expect that pattern to persist, with tech-related sectors staying strong and supporting overall exports.”

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— David Qu, China economist. Click here to read the full report

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The rising dominance of Chinese companies across the global value chain has also led to rising tensions with Europe and the US, especially in areas like carmaking and more recently hardware for data centers. China’s swelling trade surplus has also prompted a heated discussion among economists over the role the domestic currency played in protecting the country’s manufacturing edge.