Overseas sales of Chinese ICs surged to record $35.55 bln in May, top category

With industrial production maintaining steady growth in May, China's exports continued to show strength, underscoring the role of manufacturing capabilities and external demand as key pillars of economic stabilization, economists said.

However, they cautioned that consumption showed signs of slowing for the world's second-largest economy, pointing to persistent pressure on domestic demand recovery, a trend that will require more forceful policy support.

Their comments came as fresh data showing that China's value-added industrial output — which is used to measure the activity of large enterprises with annual main business turnover of at least 20 million yuan ($2.94 million) — grew 4.5 percent year-on-year in May.

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In particular, high-tech manufacturing, covering sectors such as computers and electronic equipment, led the nation's industrial production last month, surging 15.1 percent year-on-year and accelerating by 2.3 percentage points from the previous month.

Output of integrated circuits jumped 22.9 percent year-on-year to 49.6 billion units in May, while industrial robot output climbed 27.9 percent to 101,150 units.

"China's move up the manufacturing value chain, coupled with a global artificial intelligence investment boom, continues to boost exports of high-tech goods," said Feng Lin, executive director of research at Orient Golden Credit Rating International.

Feng said China's exports of ICs surged to a record $35.55 billion in May, overtaking all other categories to become the country's largest single export, while automatic data processing equipment and components also posted strong gains, with these exports reaching $26.89 billion in May, up 66.1 percent year-on-year.

"Global AI investment enthusiasm has further intensified, with chips, computer components and electronic component prices continuing to rise, strengthening their pull on China's export value," she added.

Guan Tao, global chief economist at BOCI China, said China's export edge — especially in high-tech goods — will be a key stabilizer for growth in the second half.

In sharp contrast to the industrial and export strength, domestic retail sales of consumer goods, a key indicator of the country's consumption strength, fell 0.6 percent year-on-year in May, marking the first monthly decline since late 2022 and signaling weakness in household consumption, experts said.

Wen Bin, chief economist at China Minsheng Bank, attributed the contraction to multiple factors, including the diminishing impact of trade-in subsidy programs and a cautious consumer outlook.

"The marginal effect of the trade-in policy is fading. Earlier rounds of subsidies have already pulled forward demand for cars, home appliances and consumer electronics, and the current subsidy scale and rates are both lower than last year," Wen said.

The weakness in consumption was mirrored in the credit data. Household loans fell by 141.2 billion yuan in May, the second consecutive monthly decline, said the People's Bank of China — the country's central bank. Short-term household loans, a proxy for consumer credit, dropped by 84 billion yuan.

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The retail sales decline was driven largely by weakness in goods consumption. However, services retail sales continued to grow, rising 5.4 percent year-on-year in the first five months, highlighting a structural shift in consumer preference toward experiences over goods.

Looking ahead, Wen expects the government to maintain supportive policies for consumption, including targeted subsidies for services, income growth initiatives and expanded social safety nets.

Rebuilding consumer confidence will take time as households continue to repair balance sheets and remain cautious about income and employment prospects, he added.

Contact the writers at wangkeju@chinadaily.com.cn