Summary of Key Points
In July 2026, the total value of China's foreign trade imports and exports (expressed in US dollars) increased by 25% year-on-year. However, the growth rate declined by 5.6 percentage points compared to June, with export and import growth rates falling by 3.1 and 8.5 percentage points respectively. The slowdown was mainly due to extreme weather (severe typhoons), seasonal demand changes, and base effects. Nevertheless, exports were still supported by strong demand for AI chips and new energy vehicles; imports saw a more significant decline, which was related to the higher base level from last year and falling prices. Experts predict that foreign trade growth will rebound in August, but long-term challenges such as a global economic downturn and the fading of the AI boom remain.
I. Decline in Foreign Trade Growth Rate in July: Extreme Weather and Seasonality as Main Reasons
The total value of imports and exports in July was $683.21 billion, $15.94 billion less than in June, with a year-on-year increase of 25% (compared to 30.6% in June). Both export and import growth rates decreased, with imports experiencing the more significant decline.
Why did this happen? Firstly, extreme weather affected port operations, preventing timely shipment of goods. Secondly, seasonal patterns are at play: starting in July, export container transportation prices tend to drop as demand from markets in Europe and America (such as for holiday stocking before Christmas) diminishes, leading to reduced shipping volumes and lower transport costs, which in turn reflect short-term fluctuations in export demand.
II. Despite Decline in Exports, There Are Strong Supports: AI Chips and New Energy Vehicles
Is the decline in export growth rate temporary? In fact, there are several positive factors at play:
1. The AI boom is boosting chip exports: The export of integrated circuits totaled $216 billion in the first seven months, nearly doubling (a 99.5% increase), with a particularly strong rise of 116% in July alone. As the world invests in AI, China's chip exports are benefiting.
2. New energy vehicles and high-tech products are driving growth: The upgrading of domestic manufacturing has led to increased exports of new energy vehicles and photovoltaic products.
3. Strong external demand: There is still demand for traditional goods (such as clothing and home appliances) overseas, with exports to the United States maintaining double-digit growth (17% year-on-year in July). Although the export value to the US was $1.53 billion less than in June, the growth rate increased due to the lower base level last year.
III. Even More Severe Decline in Import Growth Rate: Three Main Factors
The decline in import growth rate was more pronounced than that of exports, driven by three main factors:
1. Higher base level from last year: Import volumes in July were higher than in previous months, making this year's year-on-year growth seem slower.
2. Disruption from extreme weather: Typhoons affected the loading and transportation of imported goods.
3. Falling prices: Import prices for commodities such as integrated circuits and crude oil have decreased, which slowed down the growth in import values even if the quantity remained unchanged.
However, imports are not entirely negative: They have continued to grow at a rate of over 20% for five consecutive months, indicating that domestic demand remains robust.
IV. Future Foreign Trade: Rebound Expected in August, but Long-Term Challenges Exist
In the short term (August), goods delayed by the typhoons will be shipped out, and experts predict that export growth rates could reach around 30%, with import growth also rebounding to around 30%. However, the volatile situation in the Middle East may affect crude oil imports.
In the long run, global economic pressures are increasing, and the AI investment boom may gradually subside, reducing the momentum behind chip exports. Export growth rates may face ongoing challenges. Additionally, August is the main flood season, with the potential for 2-3 more typhoons, adding uncertainty to foreign trade prospects.
Conclusion
The decline in foreign trade growth rate in July was a short-term fluctuation rather than a trend of sustained decline. The support from AI and new energy sectors remains, and exports are expected to rebound in August after the extreme weather passes. However, long-term global economic pressures pose significant challenges, making it increasingly difficult to maintain high growth rates in foreign trade. In simple terms, while foreign trade is currently stable with some fluctuations, the future depends on new industries (such as AI and new energy) to sustain growth.