UBS raises China’s 2026 trade forecasts: the AI hardware price cycle is reshaping China’s trade narrative

Overview

This report discusses how the AI boom is changing China’s trade structure and, on that basis, raises its 2026 China trade forecasts. UBS believes China’s imports and exports continued to outperform expectations in 1H26, with the core driver being AI-related hardware trade, particularly integrated circuits, computer components, communications equipment, PCBs, data storage, and power equipment. The report also notes that exports of automobiles, EVs, hybrid vehicles, and green products remained resilient in non-AI sectors, while traditional consumer-goods exports were weak. Strong import performance was driven more by higher prices for gold, oil products, copper, and other commodities, as well as financial investment demand, than by a broad-based recovery in domestic demand.

Core views

The core views are: first, AI trade has become the dominant variable in China’s trade growth and is deeply integrated with Asian supply chains; second, this trade expansion resembles a price cycle more than a pure volume cycle, as tight supply and demand for AI hardware, memory chips, and high-end technology products have boosted nominal trade values; third, nominal trade growth may slow in 2H26, but AI exports, green products, and automobiles should continue to provide support; fourth, despite strong nominal trade, the contribution of real net exports to GDP will be lower than in 2025, increasing the importance of domestic demand and policy easing; and fifth, the RMB has remained resilient despite deteriorating terms of trade, reflecting lower capital-outflow pressure, easing geopolitical risks, and the central bank’s tolerance for gradual appreciation.

Analysis framework

The report begins with a decomposition of China’s nominal import and export growth into prices and real volumes, then distinguishes AI-related from non-AI-related trade using product lists to identify AI-related goods. The analytical framework covers exports, imports, prices, regional supply chains, policy implications, and exchange-rate implications. On the export side, it focuses on AI hardware, green products, automobiles, and consumer goods; on the import side, it examines semiconductor processing trade, gold, energy, and industrial metals; at the macro level, it assesses trade’s effects on real GDP, domestic-demand policy, global inflation, and the RMB.

Methodology notes

• Trade classificationWTO AI-enabling product list

  Defines AI-related goods using 104 HS6 products

  The report primarily adopts the WTO’s narrower definition to identify AI-related trade because differences in HS10-code mapping between China and the US create uncertainty. The narrower definition reduces uncertainty in cross-code-system comparisons.

• Trade classificationNBER broader AI-related list

  Uses 665 HS10 items as a broader reference

  The report uses the NBER’s broader definition as a supplementary validation, showing that both AI-related exports and imports achieved approximately 40%–47% YoY growth.

• Macroeconomic decompositionDecomposition of nominal trade, prices, and real volumes

  Distinguishes price contributions from volume contributions

  The report emphasizes that trade strength in 2026 was driven mainly by price increases, particularly in AI hardware and commodities, while real export and import momentum had already slowed in Q2.

• Macroeconomic contributionEstimated contribution of net exports to real GDP

  Estimates the contribution of net exports to growth based on changes in real imports and exports

  The report forecasts a net-export contribution of approximately 0.8 percentage points in 2026, below 1.6 percentage points in 2025, indicating that domestic demand will need to provide more growth support.

Asset mapping & comparison

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

• AI hardware and semiconductor supply chain

  Core beneficiary theme

  Strengths

  Global AI capital-expenditure expansion, tight memory supply, higher prices, and China’s large-scale hardware-component manufacturing support exports.

  Weaknesses

  GPUs, HBM, and advanced semiconductor equipment remain dominated by other economies, constraining China’s continued move up the value chain.

  Comparison

  Compared with traditional technology upcycles, the current AI trade cycle relies more on prices and product-mix upgrades than on pure volume expansion.

  Risks

  A downturn in global AI capital expenditure, a peak in memory-chip prices, price declines after supply constraints ease, and restricted access to advanced equipment.

• China macroeconomy

  Trade upgraded, but growth quality requires monitoring

  Strengths

  Nominal imports and exports significantly exceeded expectations, while the AI chain and green exports supported industrial production.

  Weaknesses

  Real import and export momentum slowed in Q2, net exports will contribute less to GDP than in 2025, and domestic demand and property remain weak.

  Comparison

  The 2026 net-export contribution is expected to be 0.8 percentage points, below 1.6 percentage points in 2025.

  Risks

  Continued weakness in domestic activity, insufficient policy implementation, and imports below expectations.

• RMB exchange rate

  Resilient asset performance

  Strengths

  Lower capital-outflow pressure, easing geopolitical risks, central-bank tolerance for gradual appreciation, and signals of export competitiveness support the RMB.

  Weaknesses

  Import prices rising faster than export prices have worsened terms of trade, while a stronger US dollar and weak domestic demand may limit appreciation.

  Comparison

  Although deteriorating terms of trade would typically create depreciation pressure, the RMB has strengthened against both the US dollar and a basket of currencies during this cycle.

  Risks

  A stronger US dollar in 2H26, weaker domestic demand, and escalating trade tensions.

• Gold and precious metals

  Import-growth and investment-demand theme

  Strengths

  Higher gold prices, global uncertainty, and geopolitical tensions are driving China’s commercial gold imports and demand for bars and coins.

  Weaknesses

  Jewelry consumption is constrained by high gold prices, and commercial demand may normalize as price momentum weakens.

  Comparison

  Gold imports mainly reflect financial investment demand and do not equate to a broad-based recovery in physical domestic demand.

  Risks

  A decline in gold-price momentum, cooling investment demand, and changes in the pace of central-bank purchases.

• Copper, grid equipment, and selected industrial metals

  Beneficiary theme from policy and AI/energy infrastructure

  Strengths

  AI data centers, electrification, power grids, and infrastructure investment may support demand.

  Weaknesses

  New property starts continue to decline, and the traditional property-chain restocking cycle is absent.

  Comparison

  These assets are more supported by AI and energy-transition demand than property-chain commodities such as iron ore.

  Risks

  Slow policy implementation, weakening global industrial demand, and commodity-price volatility.

• Automobiles, EVs, and green exports

  Source of non-AI export resilience

  Strengths

  EV technology, cost competitiveness, product quality, and manufacturing scale support gains in overseas market share.

  Weaknesses

  Future growth depends on policy changes in key markets, especially Europe; solar exports are also affected by adjustments to China’s export-tax rebates.

  Comparison

  Compared with traditional consumer goods, automobile and green-product exports performed significantly better in 2026.

  Risks

  Tariff and non-tariff barriers, changes in European policy, slowing global demand, and overcapacity investigations.

• Traditional consumer-goods exports

  Weak export segment

  Strengths

  Some home appliances and household products may receive temporary demand support from extreme weather.

  Weaknesses

  Textiles and apparel, footwear and headwear, furniture and lighting, toys, and sporting goods performed weakly amid soft global consumer demand.

  Comparison

  These segments significantly lagged AI hardware, green products, and automobile exports.

  Risks

  Persistent global inflation, weak consumer spending, and rising trade barriers.

Key data

• 1H26 export growth17.6% YoY, described as approximately 18% YoY in the report summaryExports significantly exceeded expectations despite RMB appreciation.
• 1H26 import growth26% YoYImports were strong, but much of the growth was driven by higher prices, AI processing trade, gold, and other factors.
• AI-related export growthApproximately 40%–47% YoY YTD; approximately 47% YoY under the WTO definitionAI-related products contributed approximately 49% of overall export growth.
• AI-related import growthApproximately 44%–47% YoY YTD; approximately 47% YoY under the WTO definitionAI-related products contributed approximately 47% of overall import growth.
• Share of AI products in tradeApproximately 23% of exports and 30% of importsUp significantly from 17% of exports and 22% of imports in 2023.
• Electronics IC export value and volumeExport value rose 96% YoY in 1H26, while volume increased only 6%This shows that the current AI trade cycle is driven more by prices and product-mix upgrades.
• Export pricesUp 6.5% YoY in 1H26After a cumulative decline of approximately 17% over the previous three years, prices rebounded in 2026, driven by technology products and reflation.
• Import pricesUp 18% YoY in 1H26The increase was faster than that in export prices, resulting in deteriorating Chinese terms of trade.
• Non-AI exportsUp 11% YoY in 1H26Resilience came mainly from green products, automobiles, EVs, and hybrid vehicles.
• Automobile exportsUp 60% YoY in 1H26Hybrid-vehicle exports rose 115% YoY, while EV exports increased 57% YoY.
• Green exportsUp 31% YoY in 1H26Batteries, solar, wind power, power equipment, and optical fibers benefited from electrification and infrastructure demand.
• Traditional consumer-goods exportsTextiles and apparel +1.4%, footwear and headwear -5%, furniture and lighting +0.6%, toys and sporting goods -12%This reflects still-weak global consumer demand amid inflation.
• Gold importsUp 189% YoY YTDContributed more than one-quarter of total import growth, mainly reflecting financial investment demand.
• UBS 2026 export forecast18% nominal US-dollar growthThe previous forecast was 3%.
• UBS 2026 import forecast24% nominal US-dollar growthThe previous forecast was 1.8%.
• Real goods export forecast8%–9% growth in 2026Slightly below the 9%–10% growth recorded in 2025.
• Real goods import forecast7%–8% growth in 2026Above the approximately flat level in 2025.
• Contribution of net exports to real GDPApproximately 0.8 percentage points in 2026Below 1.6 percentage points in 2025, indicating rising pressure to support domestic demand.

Impact & implications

The macro implication is that China’s trade structure is shifting away from traditional consumer goods and property-related demand toward AI hardware, the green transition, EVs, and selected industrial capital goods. For policy, strong exports are insufficient to offset slowing domestic demand. UBS expects the Politburo meeting to send clearer easing signals, focusing on faster fiscal implementation, coordination with monetary easing, and infrastructure support such as the “six networks.” Globally, higher prices for China’s AI-related exports may ease concerns about China exporting deflation, but could also create localized inflationary pressure in AI hardware and selected capital goods. For the exchange rate, although faster import-price growth has worsened terms of trade, the RMB has remained resilient due to lower capital-outflow pressure, easing geopolitical risks, and central-bank tolerance.

Risks

• A downturn in the global AI cycle or lower-than-expected technology capital expenditure could weigh on AI-related exports.
• Prices of AI inputs, particularly memory chips, are highly volatile, making this trade-growth cycle more price-sensitive.
• Trade-policy risks are rising, including higher tariffs, non-tariff measures, Section 301 investigations, and a tougher EU stance toward China.
• Geopolitical shocks, weaker global demand, or commodity-price volatility could suppress exports and imports.
• If domestic economic activity remains weak as in Q2, import volumes could fall below expectations.
• China’s continued move up the AI value chain is constrained by access to GPUs, HBM, and advanced semiconductor equipment.
• Nominal import growth could cool after momentum in gold and commodity prices weakens.

What to watch

• The pace of global AI capital expenditure and price trends for memory chips, DRAM, and NAND.
• Breakdowns of China’s AI-related export values, volumes, and prices, particularly for electronics ICs, computer components, optical modules, PCBs, and data-storage equipment.
• China’s AI trade with Asian supply-chain partners, including Hong Kong, China, Vietnam, South Korea, and Taiwan, China.
• Whether exports of automobiles, EVs, hybrid vehicles, and green products can sustain high growth.
• Whether traditional consumer-goods exports remain weak, and whether heatwave-related appliance demand is merely a short-term disturbance.
• Changes in gold, copper, oil-product, and iron-ore prices and import volumes.
• Signals from the Politburo meeting and subsequent fiscal, monetary, infrastructure, and property policies.
• The RMB’s performance against the US dollar and a basket of currencies, as well as the PBoC’s tolerance for RMB appreciation.
• Developments in US Section 301 investigations, EU trade policy toward China, and other non-tariff barriers.