China's trade performance in May 2026 exceeded market expectations, with both exports and imports posting significant year-on-year gains despite ongoing disruptions from the Iran war [1]. According to official customs data, exports rose by 19.4% in U.S. dollar terms compared to the previous year, accelerating from a 14.1% increase in April and surpassing economists' forecast of 15% growth [1]. Imports also showed strong momentum, expanding by 27.4% in May, up from a 25.3% rise in April and beating the consensus estimate of 25% [1].
The surge in exports was largely attributed to robust global demand for AI-related and renewable-energy products, which helped offset the negative impact of the Middle East conflict [1]. Economists noted that overseas buyers rushed to secure supplies ahead of potential energy cost increases, but cautioned that this tailwind may be temporary as stockpiling momentum could fade [1]. On the import side, growth was concentrated in select categories such as semiconductor chips and gold, driven by higher input costs rather than broad-based demand, with Bank of America Global Research emphasizing that genuine trade rebalancing remains distant [1].
Despite the strong trade data, China's domestic economy showed signs of weakness. Growth slowed across the board in April, with industrial production and retail sales posting their weakest gains in years, and the official manufacturing activity gauge in May slowed to 50, the threshold between expansion and contraction [1]. Economists, including Xiangrong Yu of Citi Bank, expect the AI boom to continue supporting production and trade, but anticipate that domestic demand will remain weak, with retail sales growth potentially falling to zero in May [1].
The labor market also remains under pressure, as manufacturing jobs continue to contract due to productivity gains from automation, according to Frederic Neumann of HSBC Bank [1]. Economists described China's current economic environment as a 'K-speed' growth paradigm, with strong performance in manufacturing and exports contrasting with persistent weakness in property markets and consumer spending [1].
CONCLUSION
China's May trade data highlights the resilience of its export sector, particularly in AI and technology, amid geopolitical disruptions. However, underlying domestic weaknesses and a fragile labor market suggest that the export-driven momentum may not be sustainable without a recovery in consumer demand.