(Corrects sixth paragraph to remove reference to the Strait of Hormuz being a key route for China’s Europe‑bound goods)
By Joe Cash
BEIJING, March 10 (Reuters) – China roared into 2026 with exports far outstripping forecasts, fuelled by red-hot electronics demand, putting the economy on track to top last year’s record $1.2 trillion trade surplus – barring a wider energy and shipping shock from the war in Iran.
Outbound shipments from the world’s second-largest economy grew 21.8% in U.S. dollar terms in the January-February period, sharply up from the 6.6% increase recorded in December and blowing past the median forecast in a Reuters poll of 7.1% growth.
“The strength in integrated circuits and technology exports is well expected, in line with the artificial intelligence investment boom,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
“Growth in clothing, textiles and bags exports was surprising, given their poor performance in 2025 amid challenges from Southeast Asia and South Asia,” he added.
China’s export momentum could accelerate further in the near term, Xu said, with March data likely to show factories rushing shipments to the U.S. to exploit the Supreme Court’s tariff reprieve and Chinese firms muscling back into low value-added sectors like textiles.
Economists say it’s still too soon to know whether U.S. and Israeli strikes on Iran – and the shutdown of the Strait of Hormuz, a chokepoint for one‑fifth of global oil – will derail manufacturers in the months ahead.
China stockpiled key commodities needed by its manufacturers, including iron ore and crude oil, in the first two months of the year.
SUPPLY-CHAIN DOMINANCE
Meanwhile, rapidly rising global defence spending could lift external demand for Chinese industrial goods, according to Dan Wang, director for China at Eurasia Group. She added that there is also big demand for China’s ‘New Three’: electric vehicles, lithium-ion batteries and solar cells.
Landing just days after Beijing rolled out a five-year blueprint centred on speeding up tech breakthroughs and embedding AI across industry, the data reinforces policymakers’ conviction that heavier investment in strategic sectors will lock in China’s grip on global supply chains.
China’s trade surplus for the first two months came in at $213.6 billion, the data showed, far exceeding the $169.21 billion recorded in the same period last year. Economists had forecast a trade gap of $179.6 billion in the poll.
Semiconductor exports rose an annual 66.5%, the fastest growth in well over a decade, buoyed by a global memory chip shortage.
China and Hong Kong shares rose on Tuesday, rebounding from the lowest levels since December and August, respectively, supported by comments from U.S. President Donald Trump that the Middle East war could come to a quick conclusion and the better-than-expected trade data.
XI-TRUMP SUMMIT LOOMS LARGE AS MARKETS EYE IRAN WAR RISKS
Lynn Song, ING’s Greater China chief economist, said it’s “a risky bet” to assume the momentum will hold, warning that the Iran war’s impact on energy prices could tip economies toward stagflation.
“However, if Trump’s prediction of an end to the Iran war ‘very soon’ comes to fruition and we see a timely resolution, we may need to revisit our expectations for a more modest boost from external demand this year,” he added.
Another major wild card for China’s export‑led growth is this month’s much-anticipated summit in Beijing between Trump and Chinese President Xi Jinping.
Hopes for a meaningful truce between the two superpowers remain low, with both sides appearing ready to resume their trade war if necessary.
All the same, Trump’s 2025 tariff onslaught barely dented China’s industrial momentum, with manufacturers redirecting their exports to Southeast Asia, Africa and Latin America to blunt the impact of losing U.S. demand.
Exports to ASEAN jumped an annual 29.4% in the January-February period, while shipments to Europe and South Korea rose 27.8% and 27%, respectively.
China’s export push may face hurdles in 2026 if more nations adopt U.S.-style tariffs, driven by rising concerns that Chinese overcapacity is spilling surplus goods into global markets and squeezing local industry.
Premier Li Qiang announced last week that China would seek an economic growth target of 4.5%-5% for 2026, down from last year’s 5%, which was met largely through a one-fifth surge in its trade surplus.
Although policymakers pledged a “notable” increase in household consumption in the government’s next five-year plan, economists are sceptical that Beijing will move away from its reliance on exports any time soon, as the strategy document offered few specifics to bolster expectations for robust demand-side reform.
China’s imports increased 19.8% in January-February, well above the 5.7% gain in December.
Economists said the upbeat data may prompt policymakers to delay stimulus and lean even harder on exports.
“Against this backdrop of strong export performance and a low official growth target, China is unlikely to introduce further stimulus measures in the short term,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
(Reporting by Joe CashEditing by Shri Navaratnam)
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