Two Stories Behind China's High Export Growth

Li Zhiheng / Text

On March 10, the General Administration of Customs announced that in the first two months of 2026, China’s merchandise trade exports valued at $656.6 billion, a year-on-year increase of 21.8%; merchandise imports reached $443 billion, up 19.8%.

China’s exports kick off 2026 with a strong start: Global AI infrastructure investment drives noticeable increase in external demand, and the staggered holiday effect shifts export momentum forward

Boosted by ongoing recovery in global manufacturing and expanding global AI investment, China’s exports have experienced a robust start. On one hand, the overall rebound in external demand provides strong support. In February, the global manufacturing PMI rose to 51.9%, reaching a 44-month high. Major economies such as the US, Eurozone, and Southeast Asia all saw manufacturing PMI in expansion territory, indicating synchronized recovery in global manufacturing demand. On the other hand, rapid expansion in global AI infrastructure investment has significantly increased demand for key products like semiconductors and data center equipment. Driven by this, China’s integrated circuit exports grew by 72.6% year-on-year in January–February. This trend is also reflected in South Korea’s semiconductor export data, which showed a 160.8% year-on-year increase in February, setting a monthly record, with exports exceeding $20 billion for three consecutive months.

In terms of rhythm, concentrated shipments before the Spring Festival boosted export growth. In January and February, exports increased by 10.0% and 39.6% year-on-year, respectively. The sharp rise in February was mainly due to the “staggered holiday effect.” Since the 2026 Spring Festival falls in late February, factories had ample time for production and shipments in the first half of the month. Companies generally scheduled shipments before the holiday, creating a clear “pre-holiday export rush” window. As a result, the export growth rate in March may marginally slow due to the backlog of orders shipped before the holiday. In years with later Spring Festivals, such as 2018 and 2021, the pattern of “concentrated shipments before the holiday and slowdown after” was observed. Therefore, assessing the true strength of export growth still requires a comprehensive review of overall first-quarter performance.

Looking at the export market structure, non-US markets have strengthened across the board, effectively offsetting declines in exports to the US. China’s exports to major non-US markets—Africa, ASEAN, EU, and South Korea—grew by 49.9%, 29.4%, 27.8%, and 27.0% respectively in January–February, all significantly higher than the overall export growth rate. In contrast, exports to the US declined by 11.0% year-on-year in the same period. Even excluding the high base effect caused by tariff expectations in the same period of 2025, exports to the US still fell by 8.4% compared to 2024, reflecting ongoing adjustments in China-US trade routes amid the trade war and industrial chain restructuring.

Regarding export product structure, electromechanical and high-tech products continue to lead, accelerating the transformation of new and old growth drivers. In January–February, exports of electromechanical products and high-tech products increased by 27.1% and 26.9% respectively. Notably, exports of integrated circuits, automobiles (including chassis), and ships grew by 72.6%, 67.1%, and 52.8%. Conversely, exports of rare earths, mobile phones, and steel declined by 15.9%, 9.0%, and 8.3%, affected by industry cycles and trade environment.

Two new narratives for China’s exports: Market diversification and product structure upgrading

China’s strong export performance reflects not only the cyclical recovery of global demand and short-term disruptions caused by the staggered holiday schedule but also deep structural shifts in the logic of China’s export growth. Currently, China’s export resilience is increasingly supported by two new narratives: market diversification and product structure upgrading.

The first new trend is the continuous diversification of export markets, with non-US markets becoming the core source of growth. As emerging economies in ASEAN, Latin America, and Africa advance industrialization and infrastructure development, their demand for equipment, components, and industrial finished products continues to grow, becoming vital support for China’s exports.

ASEAN and Latin American economies are gradually improving manufacturing capacity and local industrial chains. While they take on some low-end segments of the supply chain, they also drive sustained demand for upstream intermediate and capital goods from China. For example, in the textile and apparel industry, China’s share of global knitted garment exports fell from a peak of 42.0% in 2013 by 11.2 percentage points to 30.8% in 2024. During the same period, Bangladesh and Vietnam increased their shares by 6 and 2.6 percentage points respectively. According to the Global Value Chain Laboratory at the University of International Business and Economics (UIBE GVC), China is the largest foreign value-added (FVA) contributor to Vietnam’s textile and apparel exports, with its share rising rapidly from 22.0% in 2015 to 42.8% in 2021. In 2021, about 25% of Vietnam’s textile and apparel exports’ value-added originated from China.

In contrast, Africa exhibits different development stages. Compared to ASEAN and Latin America, which have entered local manufacturing phases, Africa remains in the acceleration stage of infrastructure and industry formation. The typical supply chain development involves “direct investment and factory building—driving capital goods imports—forming stable intermediate goods flow.” Peak capital goods imports in ASEAN and Latin America occurred around 2010. Recently, as local industries have strengthened, capital goods imports have slowed, indicating a move toward “localization,” with reduced dependence on external equipment. Meanwhile, Africa’s demand for capital goods remains high, with an average annual growth rate of 18.4% from 2021 to 2024. In 2025, China’s exports of capital goods to Africa accounted for 6% of total exports, up 1 percentage point from 2024.

The rise of emerging markets has significantly weakened the drag effect of declining exports to the US. The US remains an important export market for China, but dependence has decreased markedly since the 2018 US-China trade friction. From 2018 to 2025, China’s exports to the US fell from 19.2% to 11.4% of total exports. As the export focus shifts from traditional developed economies to emerging markets, China’s export resilience has strengthened compared to the previous trade friction cycle.

The second new trend is the continuous upgrade of the product structure, with intermediate and capital goods becoming the main growth drivers. Based on the purpose of products in the production process and their position in the global value chain, exports can be divided into three categories: intermediate goods, capital goods, and consumer goods. Intermediate goods are components, raw materials, and semi-finished products used to produce other goods; capital goods are industrial equipment used for expansion; consumer goods are final products for end markets. The restructuring of global industry chains promotes sustained growth in intermediate and capital goods exports, which are now the core of overall export growth. Meanwhile, exports of consumer goods have been relatively weak due to trade frictions and the transfer of low-end industries. In 2025, exports of intermediate and capital goods increased by 10.4% and 5.6% respectively, contributing 5.8 percentage points to overall export growth. In contrast, consumer goods (including cross-border e-commerce parcels) declined by 1.0% year-on-year, dragging overall exports down by about 0.3 percentage points.

Chinese companies’ “going global” further reinforces this structural shift. To expand overseas markets, some Chinese firms invest in local factories. However, due to China’s technological and scale advantages in key components, machinery, and raw materials, even when low-end segments shift abroad, foreign companies remain highly dependent on China’s upstream supply chain, boosting exports of intermediate and capital goods. From 2017 to 2024, the average annual growth rate of China’s exports of intermediate goods to ASEAN and Latin America was 11.6% and 11.8%, respectively, with their shares rising to 54.6% and 45.9%.

Meanwhile, domestic industry chains are accelerating their upgrade to mid- and high-end. From 2017 to 2025, the added value of high-tech manufacturing accounted for 12.7% to 17.1% of above-scale industrial output. Driven by industrial upgrading, exports of high value-added products remain rapid. In 2025, exports of automobiles, ships, and integrated circuits grew by 21.4%, 26.7%, and 26.8% respectively, with high value-added capital and intermediate goods becoming the main export categories, significantly enhancing trade stability and competitiveness.

(Author: Chief Economist and Director of Research at Yuekai Securities)

Editor: Liu Jinping Chief Editor: Cheng Kai