China’s trade returns to growth on back of AI equipment imports


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China’s imports of critical equipment for developing artificial intelligence have surged this year, official data has shown, driving a return to trade growth for the world’s second-biggest economy as the global race for AI supremacy intensifies.

The value of China’s imports of automatic data processing equipment — which includes computers and their components — surged 50 per cent year on year in the first four months of 2024, according to official statistics released on Thursday. Imports of computer chips and other high-tech products recorded double-digit gains from the same period last year.

The boom in AI equipment purchases helped Chinese trade return to growth in dollar terms in April following declines in the previous month. It comes as the country contends with rising geopolitical tensions over trade and industrial policy.

The value of imports expanded 8.4 per cent in dollar terms in April compared with a year earlier, beating analysts’ expectations of just below 5 per cent and reversing a decline of 1.9 per cent in March.

Exports also expanded, rising 1.5 per cent, meeting analysts’ forecasts and overturning an annual decline of 7.5 per cent in March, when lower prices battered producers.

“For imports, strength was heavily concentrated in a few categories,” said Lynn Song, ING’s chief China economist. “The main theme in our view is the goal to compete in the AI race.” By comparison, many other import categories, including agricultural products, coal and cosmetics, remained “heavily in contraction”.

Trade also expanded by value in the first quarter, with exports rising 1.5 per cent year on year in the January-March period and imports climbing 3.2 per cent.

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China’s government is leaning on a manufacturing revival, particularly in its high-tech industries, to boost economic growth and offset flagging property investment, weak consumer confidence and inefficient infrastructure spending.

China last month reported a GDP expansion of 5.3 per cent in the first quarter against a year earlier, and policymakers have set a target of 5 per cent growth for 2024, but analysts have warned that achieving it may be ambitious.

Beijing has stopped short of implementing sweeping stimulus but has announced more support for factories, including a programme for industries to “upgrade” equipment and consumers to buy new appliances.

In AI, China has sought to create a supportive regulatory environment to encourage growth, using tax breaks and subsidies. However, domestic technology companies have also been hampered by increasing restrictions on technology exports from the US and its allies, which have threatened to cut off access to semiconductors and chipmaking equipment vital to AI development.

Economists have also called on Beijing to do more to boost consumer and investor confidence through direct stimulus measures and strengthening the welfare safety net. The economy has struggled with deflation, with consumer prices rising just 0.1 per cent in March. China reports April consumer and producer price indices on Saturday.

HSBC analysts said the return to positive trade growth might in part reflect “some of green shoots” in global demand.

The US and Europe have accused Beijing of unfair trade practices and driving up supply far in excess of domestic demand, leading Chinese exporters to dump artificially cheap, subsidised goods on international markets.

In response, Chinese officials have become increasingly outspoken about the country’s industrial policy.

Last month, Xi told German Chancellor Olaf Scholz, who was visiting Beijing, that the country’s exports were helping to ease global inflation and supporting the clean energy transition.

On Monday, he told European Commission president Ursula von der Leyen and French President Emmanuel Macron that China did not have an overcapacity problem.

Additional reporting by Wenjie Ding in Beijing and William Sandlund in Hong Kong

Video: AI: a blessing or curse for humanity? | FT Tech


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