Morgan Stanley raises China’s 2026 export and import growth forecasts to 20% and 26%

Overview

The report argues that China’s trade growth is spreading from artificial intelligence-related electronics to machinery equipment, industrial raw materials and other investment goods. Strong prices, solid trade volumes, the Asian capex cycle and upgrades in China’s supply chain jointly support the export and import outlook for 2026 to 2027. Trade’s direct contribution to real GDP increases only modestly, but its spillover effects on industrial production, investment, corporate profits and nominal GDP are more favorable than in 2024 to 2025.

Core views

First, artificial intelligence-related investment remains the most durable support for exports, with semiconductors, computers and related equipment directly benefiting. Second, Asia is entering a multi-year capex cycle driven by artificial intelligence infrastructure, energy and energy transition, defense spending and supply chain localization, and export strength will spread to machinery and industrial materials. Third, with a complete industrial system, deeply integrated supply chains and a large pool of science and engineering talent, China is expected to continue increasing its share of the non-energy trade market. Fourth, price increases rather than a surge in trade volumes are the main reason for the recent acceleration in nominal growth, so price normalization will cause growth to fall back in 2027. Fifth, foreign trade resilience reduces the urgency of immediately launching large-scale new stimulus, and policy will prioritize deploying existing fiscal resources.

Analysis framework

The report decomposes nominal trade growth into price and volume, and breaks down contributions by electronics, machinery and transportation equipment, industrial materials, consumer goods, energy and commodities; it also combines trade destinations, the Asian capex cycle, global artificial intelligence investment forecasts and China’s supply chain structure to form trade forecasts for 2026 to 2027, and estimates the mechanical contribution of net exports to GDP as well as their indirect impact on production, investment and profits.

Methodology notes

• Growth decompositionNominal trade price-volume decomposition

  Decompose USD-denominated trade growth into real trade volume growth and price changes.

  This method shows that export volume in the first half of 2026 accelerated only slightly compared with 2025, while the sharp acceleration in nominal exports mainly came from rising artificial intelligence hardware prices and a mild appreciation of the renminbi against the US dollar; nominal import growth was also mainly driven by commodity and artificial intelligence hardware prices.

• Structural analysisProduct category contribution decomposition

  Calculate each product category’s percentage-point contribution to overall import and export growth.

  Electronics are the largest contributor to import and export growth, while machinery equipment and industrial materials are making an expanding contribution to exports; import growth is concentrated in electronics, non-energy commodities and gold.

• Macroeconomic accountingNet export GDP contribution decomposition

  Estimate the direct contribution of net exports to real GDP growth from the perspective of national economic accounting.

  The report expects the contribution of net exports to rise slightly from 0.8 percentage points in the first half of 2026 to 0.9 percentage points in the second half, averaging about 0.8 percentage points in 2027, but this accounting does not fully capture trade’s spillover effects on industrial production, investment and profits.

• Scenario analysisPolicy and trade risk scenarios

  Assess the upside and downside effects of changes in capex, prices, geopolitics and domestic demand on the forecasts.

  Continued upside surprises in artificial intelligence and regional capex constitute upside risks; geopolitical deterioration, energy input shocks and rapid declines in artificial intelligence hardware, gold and commodity prices constitute the main downside risks.

Asset mapping & comparison

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

• China semiconductor, computer and artificial intelligence hardware industry chain

  Expansion in artificial intelligence capex directly drives exports, imports and industry profits for related products.

  Strengths

  China is deeply integrated into the Asian electronics supply chain, and electronics have become the largest contributor to trade growth.

  Weaknesses

  Growth concentration is relatively high, and nominal revenue is sensitive to hardware price premiums.

  Comparison

  Compared with consumer goods, electronics contributed significantly more to export growth in the first half of 2026.

  Risks

  Cooling artificial intelligence capex, rapid normalization of hardware prices, technology restrictions or supply chain restructuring.

• China machinery equipment and industrial materials industry chain

  The spread of the Asian capex cycle will boost export demand for general machinery, capital goods and intermediate goods.

  Strengths

  Export drivers have broadened from electronics to machinery and industrial materials, with general machinery exports growing 31.4% YoY in July 2026.

  Weaknesses

  Dependence on the global investment cycle, corporate financing conditions and regional demand is relatively high.

  Comparison

  The contribution of machinery and industrial materials has improved significantly compared with 2025, but the overall scale remains below that of electronics.

  Risks

  Weakening global industrial cycle, geopolitical shocks, shortages of energy inputs and trade barriers.

• Copper, gold and other non-energy commodities

  Global investment demand and price increases have significantly boosted China’s nominal import growth.

  Strengths

  Non-energy commodities and gold contributed 6.0 and 7.3 percentage points, respectively, to import growth in the first half of 2026.

  Weaknesses

  Much of the increase in import value comes from prices rather than volumes, so macro demand signals may be amplified by price effects.

  Comparison

  Commodities and gold contributed far more to import growth than non-electronic machinery equipment.

  Risks

  Declines in copper, gold and other commodity prices will significantly weigh on nominal import growth.

• China new energy, robotics and pharmaceutical industry chains

  Supply chain upgrading is gradually extending export growth drivers from batteries, electric vehicles and photovoltaics to artificial intelligence, robotics and pharmaceuticals.

  Strengths

  China has a complete range of industrial categories, large-scale manufacturing capabilities, deeply integrated supply chains and a large pool of science and engineering talent.

  Weaknesses

  The industry faces overseas localization of production, disputes over policy subsidies and market access constraints.

  Comparison

  Traditional green products still maintain relatively high growth, while artificial intelligence, robotics and pharmaceuticals have become stronger new drivers since late 2025.

  Risks

  Trade frictions, anti-subsidy measures, tighter overseas regulation and weaker-than-expected end demand.

• Renminbi and China macro risk assets

  Trade surplus, nominal growth and improved corporate profits provide support, but expectations for policy easing may be pushed back due to foreign trade resilience.

  Strengths

  Strong exports, tax revenue improvement and accelerated fiscal deployment help the economy rebound sequentially in the second half of 2026.

  Weaknesses

  Domestic demand and final consumption remain weak, and the economic recovery continues to show K-shaped divergence.

  Comparison

  Trade-related sectors show better business conditions and profit performance than labor-intensive traditional economic sectors.

  Risks

  Persistent weakness in domestic demand, weaker-than-expected fiscal execution, geopolitical deterioration and external price shocks.

Key data

• 2026 export growth forecast20%USD-denominated, versus the previous forecast of 10%; actual growth in 2025 was 5.4%.
• 2026 import growth forecast26%USD-denominated, versus the previous forecast of 15%; actual growth in 2025 was 0.2%.
• 2027 export and import growth forecasts11% and 9%Previous forecasts were 9% and 2%, respectively, and are expected to normalize compared with 2026.
• 2026 export and import volume growth forecasts10% and 8%Expected to slow to 8% and 5%, respectively, in 2027.
• Nominal export growth in the first half of 202617.7%Higher than 5.4% in 2025; electronics contributed 10.4 percentage points.
• Nominal import growth in the first half of 202626.3%Electronics, non-energy commodities and gold contributed 12.7, 6.0 and 7.3 percentage points, respectively.
• Export and import growth in July 202623.9% and 27.5%Exports were slightly above the market expectation of 23.0%, while imports were below the market expectation of 29.5%, broadly in line with expectations overall.
• Artificial intelligence-related hyperscale cloud service provider capexAbout US$877 billion in 2026, over US$1.3 trillion in 2027YoY growth is expected to slow from 90% in 2026 to 53% in 2027.
• Contribution of net exports to real GDP growth0.9 percentage points in the second half of 2026It was 0.8 percentage points in the first half of 2026 and is expected to average 0.8 percentage points in 2027.
• Potential fiscal support in the second half of 2026About RMB 2 trillionExpected to be delivered primarily through accelerated government bond issuance and policy-based financial instruments.
• Forecast for real GDP YoY growth in the second half of 20264.6%Higher than 4.3% in the second quarter of 2026, but final consumption growth is still expected to be only about 4%.

Impact & implications

The upward revision to trade forecasts is a modest positive for China’s growth and risk assets, with beneficiaries mainly concentrated in semiconductors, computers, machinery equipment, industrial materials, new energy and hard-tech infrastructure. Because nominal growth is driven to a large extent by prices, the improvement in corporate revenue and profits may be stronger than the net export contribution shown in real GDP accounting. At the same time, foreign trade resilience makes policy more likely to first accelerate the deployment of existing fiscal resources rather than immediately launch large-scale new stimulus; if domestic demand remains significantly weak during the summer, the probability of additional easing in September to October will rise.

Risks

• Artificial intelligence hardware prices normalize faster than expected, weakening USD-denominated export growth.
• Reversals in copper, gold and other commodity prices drag on nominal import growth.
• Geopolitical uncertainty and escalating trade frictions disrupt the global industrial and supply chain cycle.
• Severe energy input volume shocks may suppress global production and investment demand.
• The Asian capex cycle or global investment boom may last for a shorter period than expected.
• China’s domestic demand and consumption remain weak, and trade improvement cannot reverse the K-shaped recovery.
• The pace of deployment or transmission effect of existing fiscal resources falls short of expectations.

What to watch

• Whether domestic demand, consumption and growth data from August to September 2026 continue to fall significantly short of expectations.
• Whether additional fiscal, monetary or real estate easing measures are introduced from September to October.
• Global hyperscale cloud service providers’ artificial intelligence capex and trends in semiconductor and computer exports.
• Whether general machinery, industrial materials and exports to ASEAN can continue to accelerate.
• The relative contributions of export prices, the renminbi exchange rate and actual export volumes to nominal export growth.
• Whether copper, gold, energy and artificial intelligence hardware prices decline rapidly.
• Progress in bond issuance and deployment of policy-based financial instruments for about RMB 2 trillion in potential fiscal support.
• Whether consumption growth and labor-intensive traditional industries can improve, thereby narrowing the divergence in the K-shaped recovery.