China’s merchandise trade imports and exports rebounded significantly in May 2026, with exports and imports increasing by 19.4% and 27.4% year-on-year, respectively, both exceeding market expectations.

Overall, from January to May, China’s total merchandise trade imports and exports increased by 19.2% year-on-year, an increase of 1 percentage point compared to January-April, with the trade surplus continuing to rise. This round of trade recovery was mainly driven by the strong global AI industry chain, rising commodity prices boosting nominal imports, and the low base in the same period last year. Profound structural changes are taking place behind the current trade growth, mainly reflected in the following three aspects:

First, the export structure continues to diverge, with high-tech products becoming the core driving force.

In May, the most crucial driving force for exports came from high-tech electromechanical products, especially core electronic components and capital goods. Among them, integrated circuit exports grew by 110.87% year-on-year, more than doubling; exports of automatic data processing equipment and high-tech products grew by 66.07% and 50.93%, respectively. Meanwhile, rare earth exports surged 237.41% year-on-year, reflecting the continued increase in global demand for rare earth resources from the new energy and defense industries. A strong global technology restocking cycle, with South Korea’s semiconductor exports rising 169.4% year-on-year in May, also indirectly confirms the high prosperity of the technology supply chain.

In contrast, exports of labor-intensive products continued to face pressure. Exports of clothing, bags, shoes, toys, and other categories all experienced negative growth. Affected by the continued relocation of low-end processing, these export industries that absorb a large number of jobs have failed to benefit from this round of trade recovery.

Overall, China’s exports are “gradually shifting towards high value-added fields such as computing power hardware and semiconductors, deeply aligning with the development needs of the global AI industry.” In the short term, the AI ​​wave has a high degree of certainty in driving exports, while in the medium to long term, the growth may shift from “B-end computing power driven to global consumer electronics replacement driven.”

Secondly, import growth is largely driven by price factors, while traditional domestic demand still needs to recover.

On the import side, although the import growth rate reached 27.4% in May, the growth was more driven by price than quantity. Taking crude oil as an example, the import value increased by 15.31% year-on-year, but the import volume decreased by 29.01% year-on-year.

Furthermore, the import value of grain and soybeans fell by 2.15% and 10.29% year-on-year, respectively, and the growth rate of import volume also turned from increase to decrease. This was mainly driven by the “high base effect and the domestic pig cycle.” Currently, “the number of sows is in a structural adjustment phase, and the overall scale of breeding has led to a seasonal slowdown in the total consumption of feed such as soybean meal.”

The PMI new export order index fell to 48.6% in May, remaining in the contraction range. “Overseas orders are still under pressure overall.” Current import growth is “mostly driven by price factors, while traditional domestic demand still needs to recover.”

Thirdly, trade between China and the US, and between China and South Korea, performed strongly. The focus should be on the implementation of tariffs and the sustainability of the AI ​​industry chain.

Looking at the trade partner structure, China’s imports and exports to the US increased by 31.31% year-on-year in May, with exports to the US increasing by 35.41%. This is “partly due to the low base formed by the decline in exports last year, and partly due to the recovery of US manufacturing and improved external demand.” Imports and exports to South Korea saw a significant year-on-year increase of 64.31%, with imports from South Korea increasing by 83.57%, primarily driven by strong demand for intermediate goods in the AI ​​industry chain, such as semiconductors and memory chips.

Going forward, two key areas need to be monitored: first, the implementation of tariff reductions on US goods, particularly the progress of the $30 billion reciprocal tariff reduction policy; and second, the sustainability of growth in the AI ​​industry chain, with a focus on whether the market’s enthusiasm for intermediate goods can translate into long-term stable orders.

Overall, thanks to a strong start in the first quarter and an unexpected surge in the second quarter, even with a marginal decline in growth in the second half of the year, the total import and export volume for 2026 is still expected to achieve a high growth rate of around 8%. The continued prosperity of the AI ​​industry chain and the implementation of new policies will be the main driving factors.