AI Mainly Boosts Export Prices, While Broad Manufacturing Competitiveness Remains the True Foundation of China's Export Resilience

Overview

The report examines how much of the acceleration in China's exports in 2026 came from AI, the true drivers of real export growth, changes in imports and the trade balance, and the potential impact of tighter EU trade policy. Its central conclusion is that AI has significantly raised nominal export values but has not yet become an important source of real export volumes or domestic value added; China's export resilience is mainly driven by broad high-tech manufacturing capabilities and genuine final demand in emerging markets.

Core views

China's headline export growth was very strong in 2026: through July, nominal exports rose 18.5% year over year, the fastest pace since the post-pandemic reopening in 2021; export volumes still increased 10.8% year over year in the first half of 2026. The report uses a narrow definition of AI-related goods, including only semiconductors, printed circuits, storage and processing units, and computer components, while excluding downstream electronic devices. On this basis, AI-related goods contributed nearly half of nominal export growth in the second quarter, with exports increasingly directed toward certain ASEAN markets involved in assembly, testing and packaging, as well as technology-producing economies in Northeast Asia. However, AI's boost to nominal exports came mainly from prices rather than physical volumes. The rapid global expansion of data centers has raised demand for AI hardware, and prices of some memory chips have increased to five to seven times their mid-2025 levels. Consequently, AI-related goods contributed about two-thirds of China's recent export-price growth. Meanwhile, their export-volume growth fell to -1.4% year over year in the second quarter of 2026, and their contribution to real export growth has recently declined to less than 1 percentage point. In other words, the high nominal growth generated by AI cannot be directly interpreted as a simultaneous sharp expansion in China's real output or export volumes. AI exports also contribute less to China's domestic value added and trade surplus than indicated by gross customs values. Customs statistics record the gross value of goods crossing borders, while a substantial portion of the value within the multinational semiconductor supply chain may accrue to overseas companies or imported inputs. Approximately 80% of nominal AI-related exports originate from processing trade or special customs supervision zones, typically involving imported components assembled or integrated in China and then re-exported. The local value added of this trade is therefore lower than in highly localized supply chains such as automobiles, and its current net impact on China's trade balance is also relatively limited. After stripping out price effects, real export growth remains broad-based and is driven primarily by non-AI high-tech manufacturing. The report constructs a product-level Laspeyres volume index, using the previous year's export value as fixed weights and applying each product's volume growth rate to separate price changes from genuine volume changes. The results show that electrical equipment and machinery excluding AI remain the largest individual sources of real export growth. The "New Three"—solar modules or cells, electric vehicles and lithium-ion batteries—account for only about 5% of nominal exports but have recently contributed approximately 1.5 to 2 percentage points to real export growth, close to the contribution from the "Old Three" of furniture, household appliances and apparel. The contribution from chemicals has also increased because Middle Eastern supply disruptions prompted global buyers to turn to Chinese producers. Export destinations are similarly diversified. ASEAN, the EU and other emerging markets in Africa, the Middle East and Latin America are the main sources of incremental demand; in the first half of 2026, China's real exports of electrical machinery and transportation equipment to the EU rose 19% year over year. Using the Asian Development Bank's multiregional input-output tables, the report compares the direct destination of goods with the market where the embedded Chinese value added is ultimately absorbed to determine whether exports to emerging markets are merely transshipments. Except for ASEAN and Mexico, the gap between the two measures is small across most emerging markets: these markets receive approximately 39% of China's total goods exports and absorb about 38% of the Chinese value added in foreign final demand, with consumption accounting for roughly 60% of final absorbed demand. ASEAN remains the main transshipment exception, receiving about 12% of China's goods exports but ultimately absorbing only around 9% of Chinese value added. Even so, approximately three-quarters of exports to ASEAN still correspond to local demand, particularly for electric vehicles and capital goods. Mexico receives 3.3% of China's goods exports and ultimately absorbs 2.2% of Chinese value added, but the report finds no evidence that it served as a major transshipment hub during the 2025 trade tensions as it did in 2018. The United States ultimately absorbs more Chinese value added than indicated by its direct imports, showing that indirect supply chains remain, although transshipment is now more concentrated in ASEAN. From 2019 to 2024, the share of Chinese value added absorbed by emerging markets increased by about 7 percentage points, of which consumption contributed approximately 6 percentage points, supporting the conclusion that export growth to emerging markets was driven mainly by local final demand rather than simple transshipment to developed markets. The policy-designated "New New Three"—AI, robotics and innovative drugs—currently make only a small measurable contribution to total exports but have long-term strategic significance. AI services are difficult to capture fully in official trade data; OpenRouter data show that Chinese providers accounted for 71% of global token consumption in July 2026, but the platform is skewed toward individual users and does not fully represent enterprise demand or commercial revenue. China became a net exporter of industrial robots in 2025, and robot exports reached US$747 million in the first half of 2026, but represented only 0.03% of total exports during the period. The announced value of overseas licensing deals for innovative drugs rose 66% year over year to approximately US$100 billion in the first half of 2026, but payments generally depend on milestones such as clinical trials and regulatory approvals and cannot immediately be equated with export revenue; China's year-to-date service exports totaled US$218 billion over the same period. The report therefore concludes that, in the short term, the "New New Three" are primarily strategic channels for moving up the value chain and exporting AI capabilities, automation solutions and intellectual-property income. Sustained policy support may generate significant incremental growth only over a longer horizon. Import growth is far less broad-based than export growth. In the first half of 2026, nominal imports rose 26.6% year over year, while import volumes increased only 7.8%. The real increase in the second quarter was concentrated mainly in gold rather than reflecting a broad recovery in domestic demand; Goldman Sachs' domestic-demand tracker has recently remained weak at around 2 percentage points. Energy import volumes have been weighed down by high prices and ample domestic inventories. If global energy prices stabilize and inventories are gradually drawn down, import volumes may recover moderately. Gold imports are influenced by the quota system, and their increase since 2026 reflects both market demand and, in part, policy permission for greater inflows. AI-related imports mainly serve processing trade and supply-chain needs and do not represent final domestic demand. Excluding the distortion from large gold imports, China's underlying trade balance widened to an annualized level of approximately US$1.3 trillion as of July 2026. Based on broad manufacturing competitiveness and resilient emerging-market demand, Goldman Sachs raised its forecast for full-year 2026 export-volume growth to 7.9% year over year, implying 5.3% growth in the second half, and continues to expect growth of about 5% in subsequent years. Weak domestic demand leads it to forecast import-volume growth of 4.4% in 2026, slowing further to around 2.5% thereafter. The divergence between export and import growth implies continued momentum for expansion of the underlying trade surplus. Trade policy is the principal downside risk. The sharp escalation in US-China tariffs in 2025 has shifted toward a more controlled and selective state of stability. After the temporary Section 122 tariffs expired on July 24, 2026, they were offset by new Section 301 forced-labor-related tariffs. As a result, the effective US tariff rate on imports from China remained broadly stable at 23% in 2026, still below China's 27.4% effective tariff rate on US goods. Nevertheless, strategic competition in AI, advanced technology, investment and critical minerals continues. EU risks are more prominent. The EU accounted for 15% of China's exports in 2025, while China's exports to Europe are increasingly concentrated in advanced manufactured products such as electrical machinery, lithium batteries, automobiles and computers. Goldman Sachs estimates that existing and proposed EU measures could affect, at least at the margin, approximately 27% of China's annual nominal exports to the EU. However, the coverage ratio does not equal actual losses, and the ultimate impact will depend on policy details and implementation. Proposed measures include countervailing duties of 17% to 38% on plug-in hybrid vehicles and expansion of the Carbon Border Adjustment Mechanism to downstream products. The basic steel and aluminum products currently covered by the latter accounted for only 2.1% of China's exports to the EU in 2025; if approximately US$58 billion in additional exports are included, the affected share would rise to 12.1%. Electrical equipment, machinery and transportation equipment that could be brought within scope contributed 4.9 percentage points of the 8.5% nominal growth in China's exports to the EU in 2025. However, the expanded scope is not expected to be implemented until 2028 at the earliest, and charges would be calculated based on the embedded carbon emissions of steel and aluminum precursors contained in finished goods rather than the total value of the finished products. For most products, the actual tax burden may therefore represent only a small fraction of the final export price, although high-carbon products such as heavy trucks could face more material costs. The report expects EU policy to tighten, but the overall impact may be relatively moderate. Chinese exporters retain cost and product-quality advantages. Even though Chinese battery electric vehicles have faced the EU's 10% baseline import tariff and manufacturer-specific countervailing duties since October 2024, exports to Europe recovered rapidly after an initial decline in 2026. Exports of internal-combustion vehicles and plug-in hybrid vehicles, which are not subject to the additional battery-electric-vehicle tariffs, increased rapidly, demonstrating companies' ability to adjust their product mix and adapt to changing rules. China supplies more than 90% of the EU's rare-earth elements by weight, giving it bargaining leverage in critical raw materials. Europe also seeks to preserve access to the Chinese market and avoid severe retaliation. Goldman Sachs therefore expects EU measures not to escalate to a level likely to provoke a strong response from Beijing, and the drag on China's export growth to Europe may be relatively limited.

Analysis framework

The report first identifies AI-related goods using a narrow definition, then decomposes nominal export growth into price and volume contributions and uses the share of processing trade to assess China's domestic value added. It subsequently applies a product-level Laspeyres volume index to identify the sources of real export growth, then uses multiregional input-output tables to compare direct export destinations with the ultimate absorption locations of Chinese value added, distinguishing genuine final demand from transshipment. Finally, the report separately evaluates the "New New Three," import composition, the trade balance excluding gold, and US and European trade policies, and uses these analyses to formulate export- and import-volume forecasts.

Methodology notes

• Industry/Sector Analysis FrameworkPrice-Volume Decomposition

  Product-Level Laspeyres Export Volume Index

  The report uses the previous year's export value for each product as a fixed weight and combines it with product-level volume growth to estimate real export growth, thereby distinguishing nominal growth caused by price increases from genuine export-volume growth.

• Industry/Sector Analysis Framework

  Final Absorption Analysis of Value Added Using Multiregional Input-Output Tables

  The report compares the direct destinations of Chinese goods with the markets where the embedded Chinese value added is ultimately absorbed to determine whether exports to emerging markets reflect genuine local demand or transshipment through third countries.

• Industry/Sector Analysis Framework

  Narrow Proxy Measure for AI-Related Trade

  Because there is no standardized definition of AI trade, the report includes only semiconductors, printed circuits, storage and processing units, and computer components, while excluding downstream electronic devices, in order to isolate trade changes caused by expanding AI computing capacity rather than general digitalization.

• Event Game Theory and Behavioral FinanceEvent-driven analysis

  Analysis of the Coverage and Implementation Conditions of US and European Trade Policies

  Based on existing and proposed tariffs, countervailing duties and the Carbon Border Adjustment Mechanism, the report estimates the range of exports potentially affected while emphasizing that actual losses depend on the final policy text, tariff rates, implementation timing and corporate adaptation.

Key data

• China's Nominal Export Growth18.5% year over year in the first seven months of 2026The fastest growth since the post-pandemic reopening in 2021
• Export-Volume Growth10.8% year over year in the first half of 2026Indicates that real exports continued to grow strongly
• Contribution from AI-Related GoodsContributed nearly half of nominal export growth in the second quarter of 2026Driven mainly by prices rather than volumes
• Contribution from AI-Related Export PricesApproximately two-thirds of recent export-price growthPrices of some memory chips have increased to five to seven times their mid-2025 levels
• AI-Related Export-Volume Growth-1.4% year over year in the second quarter of 2026The contribution to real export growth has fallen to less than 1 percentage point
• Share of Processing Trade in AI-Related ExportsApproximately 80%Exported through processing trade or special customs supervision zones, with relatively limited domestic value added
• Export Contribution from the "New Three"Approximately 5% of nominal exports, contributing 1.5 to 2 percentage points to real export growthTheir recent contribution is close to that of the "Old Three" of furniture, household appliances and apparel
• Real Exports of Relevant Equipment to EuropeUp 19% year over year in the first half of 2026Covers electrical machinery and transportation equipment
• Final Demand in Emerging MarketsReceive approximately 39% of China's goods exports and absorb about 38% of Chinese value addedConsumption accounts for approximately 60% of final absorbed demand in these markets
• ASEAN Transshipment GapReceives approximately 12% of exports and ultimately absorbs about 9% of Chinese value addedApproximately three-quarters of exports to ASEAN still reflect local demand
• Change in Emerging Markets' Absorption of Value AddedIncreased by approximately 7 percentage points from 2019 to 2024Consumption contributed approximately 6 percentage points
• Share of Token Usage by Chinese AI Models71% in July 2026Based on OpenRouter; the platform is skewed toward individual users and does not fully reflect enterprise demand
• Robot ExportsUS$747 million in the first half of 2026Only 0.03% of total exports during the period; China became a net exporter of industrial robots in 2025
• Value of Overseas Licensing Deals for Innovative DrugsApproximately US$100 billion in the first half of 2026, up 66% year over yearRevenue generally depends on clinical, regulatory and other milestones and will not immediately be converted fully into service exports
• Nominal and Real ImportsUp 26.6% and 7.8% year over year, respectively, in the first half of 2026The real increase was concentrated in gold, while domestic demand did not recover broadly
• Trade Balance Excluding GoldApproximately US$1.3 trillion annualized as of July 2026The underlying trade surplus continued to expand
• Export-Volume Forecast7.9% year over year in 2026Implies 5.3% growth in the second half, with approximately 5% growth expected in subsequent years
• Import-Volume Forecast4.4% year over year in 2026Expected to slow to approximately 2.5% in subsequent years
• Effective US-China Tariff Rates23% on Chinese goods imported by the United States; 27.4% on US goods imported by ChinaThe US rate remained broadly stable in 2026
• Potential Coverage of EU MeasuresApproximately 27% of China's annual exports to the EUThe coverage does not equate to actual export losses
• Proposed Countervailing Duties on Plug-In Hybrid Vehicles17% to 38%Among the potential new measures by the EU
• Proposed Expansion of CBAMApproximately US$58 billion in additional exports, raising the affected share from 2.1% to 12.1%Expected to be implemented in 2028 at the earliest
• China's Rare-Earth Supply to EuropeMore than 90% of EU demand by weightProvides China with a policy buffer and bargaining leverage in critical inputs

Impact & implications

The report argues that China's export growth cannot simply be attributed to the AI boom. AI currently raises nominal data mainly through prices and cross-border processing chains, whereas broad manufacturing cost and quality advantages, expansion of the "New Three," and local consumption and capital-goods demand in emerging markets form the foundation of real export growth. Relatively subdued import demand allows the underlying trade surplus to continue expanding. Tighter EU policy could erode some market share in Europe, but delayed implementation, the actual tax burden, companies' adjustment capabilities, leverage in critical materials and European commercial interests are expected to cushion the overall impact.

Risks

• The EU may expand trade measures targeting steel, plug-in hybrid vehicles, electrical machinery, wind-turbine components and basic chemicals, threatening growth in China's European market share.
• The proposed expansion of the Carbon Border Adjustment Mechanism to downstream products could increase export costs for electrical equipment, machinery, transportation equipment and high-carbon products, with the specific impact depending on final policy and implementation.
• Strategic competition between China and the United States in AI, advanced technology, investment and critical minerals could still trigger new trade or technology restrictions.
• A further escalation in protectionism and geopolitical tensions could undermine the diversification of China's export markets and products.

What to watch

• Monitor the final provisions, tariff rates and implementation timing of the EU's trade-diversion monitoring framework, countervailing duties on plug-in hybrid vehicles and downstream CBAM expansion.
• Monitor whether the CBAM expansion is actually implemented around 2028 and the effective tax burden on electrical equipment, machinery, transportation equipment and heavy trucks.
• Monitor whether AI-related export volumes turn positive and whether China's domestic value added rises beyond price increases and processing trade.
• Monitor commercialization revenue from the "New New Three," including AI service fees, the scale of robot exports and milestone payments from innovative-drug licensing.
• Monitor whether final demand in emerging markets remains resilient and whether ASEAN's transshipment share increases further.
• Monitor the effects of gold import quotas, global energy prices and changes in domestic inventories on import volumes and the trade balance.
• Monitor Chinese exporters' product-mix adjustments, cost advantages and changes in European market share after EU policy tightens.