A recent survey indicates that despite the global demand for chips and servers being boosted by the artificial intelligence (AI) craze, China’s export engine is expected to have shown signs of slowing down in March, due to the energy impact triggered by the Iran conflict.
According to a Reuters survey, China’s exports measured in US dollars are expected to increase by about 8.6% annually, significantly slower compared to the 21.8% growth seen in January and February of this year.
March will be the first test to see if the strong demand for AI and the necessary chips and servers can offset the global energy impact caused by the Iran blockade of the Strait of Hormuz, which accounts for 20% of global oil and gas transportation.
Driven by exports of technological products, China saw a far better-than-expected export growth in the first two months of 2026, potentially breaking the record trade surplus of $1.2 trillion from last year. However, the Iran conflict has cast a shadow over this momentum.
Even though the Chinese government has long been criticized by trading partners for subsidies and low-cost exports, it cannot avoid the price shock brought on by rising fuel and transportation costs.
However, Fred Neumann, Chief Economist for Asia at HSBC, stated that as buyers seek cheaper products, Chinese manufacturers still have the potential to regain market share. Meanwhile, decades of accumulation of commodity stocks also aid in alleviating the impact of raw material price fluctuations on factory prices.
Economists have varying opinions on how Chinese manufacturers performed in the first full month after the outbreak of the Iran conflict. Mizuho Securities has the highest forecast, predicting a 24% increase, higher than Macquarie Group’s expectation of 17% growth. Citigroup, on the other hand, predicts a growth rate of only 3%.
As Chinese factories rushed to ship before the “Liberation Day” tariffs imposed by U.S. President Trump on April 2, 2025, the high base effect may also become a drag on growth.
According to the Reuters survey, China’s import volume in March is expected to increase by 11.2%, compared to the 19.8% growth seen from January to February.
As an indicator of Chinese demand, South Korea’s exports to China in March increased by 62.4%, mainly driven by a 151.4% surge in global semiconductor shipments. This growth stems from memory price increases and strong server demand driven by AI.
March factory activity data in China shows that commodity exports continue to support economic growth, but the Iran conflict has led to a sharp increase in commodity prices, raising input costs and dampening market sentiment.
It is expected that China’s trade surplus for March will narrow from $214 billion in January and February to $108 billion.