Chinese equities climbed to a one-week high on Friday, with gains in semiconductor shares outweighing sharp losses in optical module makers, while Hong Kong stocks also edged higher. According to Reuters, the Shanghai Composite Index gained 0.5% and the blue-chip CSI 300 Index rose 0.8% by the midday break. The recovery came after China's exports exceeded market expectations in July, highlighting the manufacturing giant's ability to maintain export momentum despite a challenging global economic backdrop. Exports rose 23.9% year-on-year in July, beating the 22.2% growth forecast in a Reuters poll, while imports also remained robust, climbing 27.5% from a year earlier, compared with a 36% rise in June. The latest customs data shows China's trade surplus narrowed to $112.5 billion from $125.6 billion in June, with exports rising 24% year-on-year in July compared to 27% in June. Following the release of the trade data, the Chinese yuan hovered near a three-and-a-half-year high, while domestic stock markets posted gains. For the week, the Shanghai Composite advanced 2.81% and the Shenzhen Component gained 5.39%, reflecting improved investor confidence despite ongoing geopolitical concerns.
The semiconductor sector experienced a dramatic rally with AMEC shares jumping 14% in Shanghai trading and an index tracking Chinese semiconductor materials and equipment companies surging 9%. The gains were driven by reports that Samsung Electronics and SK Hynix are evaluating Chinese chipmaking equipment to reduce exposure to potential tighter US export controls. The CSI Artificial Intelligence Index jumped 4.6%, the CSI Semiconductor Index gained 3.2%, and the CSI 5G Communication Index soared more than 7%, recovering from recent lows following sharp declines. Among the strongest performers were Cambricon Technologies, SMIC, Zhongji Innolight, Eoptolink Technology, and NAURA Technology. Latest data shows SMIC climbed 3.59%, Hua Hong Semiconductor advanced 6.56%, and GigaDevice surged 8.26%. According to Reuters, semiconductor exports nearly doubled in value during the first seven months of the year, while overall high-tech exports surged 40.7%, reflecting strong international demand for advanced technology products. The technology stocks, particularly those linked to artificial intelligence, remained in focus and supported the broader market throughout the week.
The U.S. administration is drafting a ban on imports of new models of Chinese data center components, triggering heavy selling in export-oriented companies linked to the sector. Among the biggest losers were Zhongji Innolight, which fell 7.27%, and Eoptolink Technology declined 5.29%, as investors weighed the potential impact of fresh U.S. trade restrictions on future exports. This development contrasted sharply with the broader semiconductor sector's strong performance, highlighting the divergent impact of different technology segments on Chinese markets. The trade tensions come as China's exports to the US climbed just 2.6% year-on-year in the first seven months of this year, while imports from the US grew 1.4%. However, economists believe the broader impact on China's exports may remain limited because exporters have diversified toward markets including Europe and Southeast Asia.
China's automobile exports remained another bright spot in July, with exports of vehicles increasing by more than 50% in both value and volume terms as Chinese automakers continued expanding aggressively into overseas markets amid weak domestic demand. Meanwhile, crude oil imports declined 24.3% year-on-year, although they recovered from June's near-decade low as previously purchased lower-priced cargoes reached Chinese ports. Trade data reveals exports to the European Union were up nearly 17%, while exports to Southeast Asia, which as a bloc is now China's biggest trading partner, surged 25%. Trade with South Korea remained particularly strong, with exports rising 46.6% and imports jumping 97.8%, supported by demand for high-tech products. The strength in advanced manufacturing contrasted with weakness in traditional industries, with exports of ceramics falling 28.3% and toy shipments declining 9.7%. Exports increased 23.9% annually to USD 397.85 billion, while imports rose 27.5% to USD 285.35 billion, with both figures driven by healthy global demand for AI-related technology products.
Despite strong exports, China's broader economic momentum remains under pressure, with the country's economy expanding 4.3% in the second quarter, its slowest pace since late 2022. Chinese policymakers have emphasized accelerating the shift toward new growth engines, particularly advanced manufacturing and high-tech industries, while reducing reliance on traditional sectors. However, analysts believe strong export performance could reduce the urgency for authorities to introduce larger stimulus measures aimed at boosting household consumption or reviving the struggling property sector. The latest export numbers suggest China's manufacturing sector remains competitive globally, with exports to the United States rising 17% from a year earlier despite mounting tariffs. However, analysts cautioned that the rally could remain sensitive to further U.S. trade measures and the possibility of additional protectionist actions by other trading partners. Notably, price gains have inflated trade figures, with a chip shortage pushing some prices up as much as 700% over the past year, while higher oil costs and surging metal prices have lifted the value of trade beyond actual shipment volumes.
