China’s import boom narrows the surplus, with gold the biggest short-term drag

Overview

This report analyzes the sources of China’s rapid import growth and narrowing trade surplus since 2026. Goldman Sachs points out that the import expansion is not a broad-based external imbalance, but is concentrated in gold, semiconductors, and some energy price factors. Gold is the largest short-term drag, the energy shock is currently limited, and although semiconductors are widening the deficit, this is closely tied to China’s role as an intermediate-goods hub in the regional electronics supply chain.

Core views

The core views are: first, the strong year-on-year import growth from January to April was mainly driven by gold and semiconductors rather than broad-based demand overheating; second, the value of energy imports rose due to prices, but volume adjustment and inventory drawdown cushioned the pressure on the trade balance; third, gold trade is affected by quotas and policy tolerance and cannot be fully explained by ordinary goods demand; fourth, the AI investment cycle is boosting semiconductor trade activity, but its net drag on China’s overall trade balance is limited; fifth, manufacturing advantages in EVs, home appliances, and smart electronics continue to support the broader trade balance of chip-containing products.

Analysis framework

The report uses a trade decomposition framework, first breaking down nominal import growth by product contribution and by price/volume factors, then separately assessing the effects of energy, gold, semiconductors, and AI-related products on the trade balance, while explaining the apparent deficit through processing trade, special regulatory zones, downstream re-exports, and regional supply-chain specialization.

Methodology notes

• trade_decompositionImport growth product contribution decomposition

  Break down nominal import growth contributions by product category

  The report identifies the main drivers using import growth contributions from January to April, noting that gold and semiconductors together explain about 65% of import growth.

• price_volume_analysisPrice and volume factor decomposition

  Distinguish price effects and volume effects in import value growth

  The report notes that first-quarter import growth was mainly driven by volume, while the import price index rose 15.2% year on year in April, making the price effect more pronounced.

• supply_chain_tradeProcessing trade and intermediate-goods re-export analysis

  Use trade mode to determine whether semiconductor imports represent final domestic absorption

  More than half of semiconductor imports occur under processing trade and special customs supervision regimes, indicating that some chips are embedded as intermediate inputs in downstream products such as electronics, autos, and home appliances and then re-exported.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• gold

  largest short-term import drag

  Strengths

  Investment demand, the Shanghai-London price spread, and policy tolerance may support imports.

  Weaknesses

  Imports are managed by quotas, and the gold trade deficit is close to 1% of GDP, putting pressure on the surplus.

  Comparison

  Compared with energy and semiconductors, gold is a more direct drag on the recent trade balance.

  Risks

  Further quota easing or persistently high gold prices could enlarge the drag from gold imports.

• energy

  potential but currently contained trade-balance risk

  Strengths

  Lower import volumes, inventory drawdown, weak refined product demand, EV penetration, and coal substitution have cushioned the price shock.

  Weaknesses

  Crude oil and natural gas account for about 80% of China’s energy imports, so persistently high oil prices would still raise the import bill.

  Comparison

  Compared with the 2022 supply shock, volume adjustment is stronger this time.

  Risks

  If oil prices remain high for a long period and the inventory buffer is exhausted, the energy deficit could widen.

• semiconductors

  an important contributor to import growth but with limited net impact

  Strengths

  They are embedded as intermediate goods in China’s electronics manufacturing chain, with some ultimately re-exported through downstream products.

  Weaknesses

  Import volumes are larger than export volumes in absolute terms, and the semiconductor deficit is still widening.

  Comparison

  China is less able than Korea and Taiwan to benefit directly from the high-end AI chip cycle.

  Risks

  If advanced chip imports increase through workaround channels or US export restrictions are eased, the import drag could rise.

• ev

  an important support for the broader trade balance of chip-containing products

  Strengths

  The surplus in EV-related products is rising, reflecting electrification demand and China’s manufacturing cost competitiveness.

  Weaknesses

  EV value comes more from batteries, motors, and branding rather than semiconductor content itself.

  Comparison

  Compared with AI hardware exports, EVs contribute more clearly to improving China’s trade balance in chip-containing products.

  Risks

  Slower global demand, trade barriers, or price competition could weaken the surplus contribution.

• ai-related technology trade

  adjacent beneficiary but with limited direct exposure

  Strengths

  China may benefit from spillover demand for non-AI chips, traditional memory, assembly, and some electronic components.

  Weaknesses

  US export controls and the technology gap restrict advanced chip imports and high-end AI hardware exports.

  Comparison

  Korea and Taiwan are more directly exposed to demand for high-end AI semiconductors.

  Risks

  Shifts in PC assembly, relocation of AI server supply chains, and advanced chip technology gaps could limit export gains.

Key data

• China’s nominal USD import growth in January-April 202623.6% yoyFaster than exports at 14.5% yoy over the same period, leading to a narrower trade surplus.
• Contribution of semiconductors and gold to import growthabout 65%These two product categories were the main concentrated sources of this round of import surge.
• Contribution of gold to import growthabout 30%Gold is the largest short-term drag on the trade balance.
• First-quarter gold trade deficitclose to 1% of GDPDriven by both high net import volumes and elevated gold prices.
• April import price index15.2% yoyThe price effect strengthened significantly in April, explaining about 60% of that month’s import value growth.
• Contribution of semiconductors to import growthabout 35%The main contributor after gold, but the net trade impact needs to be assessed together with re-exports and downstream products.
• Estimated near-term semiconductor self-sufficiency rate in Chinabelow 40%Goldman Sachs’ equity team estimates that progress is faster in substituting low-end chips, while there are still significant gaps in advanced chips and key technologies.

Impact & implications

For asset allocation and macro assessment, this report reduces concerns about a sustained deterioration in China’s external balance, but it indicates that gold imports, oil prices, and advanced chip imports may still suppress the surplus in certain periods. Manufacturing competitiveness, EV exports, and China’s role in regional supply chains remain key supports for the trade balance, while the AI super-cycle has relatively limited direct upside and direct downside for China.

Risks

• If gold imports remain elevated or policy tolerance increases further, China’s trade surplus could continue to be compressed.
• If oil prices stay high for an extended period and the inventory buffer fades, the energy import bill could again become a significant drag on the trade balance.
• If US export controls are eased or advanced chip imports increase through workaround channels, the drag from semiconductor imports could expand.
• If AI servers and traditional PC assembly shift to Taiwan-related supply chains or places such as Vietnam, China’s ADP equipment surplus could weaken.
• A semiconductor self-sufficiency rate below 40% and a persistent gap in advanced process technology limit China’s ability to capture high-end gains from the AI capex cycle.

What to watch

• China’s gold import quotas, the Shanghai-London gold price spread, and indicators of private physical gold demand.
• Crude oil prices, energy import volumes, refinery margins, refined product export restrictions, and inventory changes.
• The share of semiconductor imports under processing trade versus ordinary trade, as well as data from special customs regulatory zones.
• The trade balance of ADP equipment, servers, computers, communications equipment, and electronic components within the AI-related product basket.
• Whether exports of EVs, home appliances, and smart electronics continue to support the broader surplus in chip-containing products.
• Changes in US export controls on advanced chips and semiconductor equipment to China, as well as China’s domestic procurement policies.