Geopolitical risks loom on China's exports, AI-fuelled boom powers trade surplus to USD 105 billion in May
New Delhi, June 11
China's export engine remained firmly driven by demand from artificial intelligence-related industries and high-end manufacturing goods in May 2026, helping the country post a trade surplus of over USD 105 billion despite growing geopolitical uncertainties, according to an ICICI Bank Research report.
China's exports expanded 19.4 per cent year-on-year in May, surpassing market expectations of 15 per cent and accelerating from 14.1 per cent growth recorded in April. Imports also rose sharply by 27.4 per cent, resulting in the trade surplus widening to USD 105.4 billion from USD 84.8 billion in the previous month.
The report noted that "China's exports continued to benefit from strong overseas demand for goods from AI-related industries and other high-end manufactured goods."
Exports of high-tech products surged 50.9 per cent year-on-year in May, while shipments of mechanical and electrical products, which account for over 60 per cent of China's exports, rose 27.4 per cent. Strong demand from the United States, ASEAN economies and other major markets supported the robust performance.
According to the report, "Mechanical and electrical products (61% of total), and hi-tech goods (25%), maintained their double-digit pace, growing at an even higher pace of 27.4% and 50.9%, respectively."
The import side also reflected sustained momentum in China's technology and infrastructure sectors. Imports of mechanical, electrical and hi-tech products, commonly used as inputs for technology exports, remained strong, while higher imports of base metals suggested continued government-led infrastructure spending.
The report said, "Strength in Chinese imports in mechanical and hi-tech products that are used as inputs for technology exports would suggest that the export outlook remains constructive."
However, the report cautioned that the favourable outlook could face challenges if geopolitical tensions intensify and weigh on global economic growth. The ongoing West Asia conflict remains a key risk factor, particularly for the global AI investment cycle that has been supporting demand for Chinese technology exports.
Highlighting future risks, the report stated, "Going forward, Chinese export outlook remains constructive. However, there are downside risks if the conflict works to derail global growth, and particularly the AI cycle."
ICICI Bank Research expects China's imports to remain linked to the momentum in technology exports and public capital expenditure.
— ANI
Reader Comments
USD 105 billion trade surplus?! That's massive. But the report's caution about geopolitical risks is spot on. The West Asia conflict could mess up global supply chains badly. For India, this is both a challenge and an opportunity - we need to position ourselves as an alternative manufacturing hub.
The numbers are impressive but also concerning for India. China's hi-tech exports growing at 50.9% while our electronics manufacturing is still struggling to take off. We need to seriously ramp up our R&D spending and create a better ecosystem for startups working on AI and semiconductors.
Good report from ICICI Bank but one must be cautious. China's export figures can be manipulated. Remember the whole "trade war" thing? Also, relying too much on AI-driven exports makes them vulnerable if the AI bubble bursts. For India, we should focus on sustainable, diverse growth.
The 27.4% import growth is also noteworthy - it shows China is importing raw materials and components to feed its export machine. Meanwhile, India's trade deficit keeps widening. Our policymakers need to study how China built this ecosystem. The infrastructure spending mentioned is key - they build roads, ports, and power plants at scale.
A fair analysis but I think the report underestimates geopolitical risks. With Taiwan tensions, US export controls, and the Middle East situation, China's exports could face serious headwinds. For India, this is an opportunity to attract companies diversifying away from China - but we need faster reforms and better ease of doing business.
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