China's export engine stutters as crisis in West Asia dents global demand

China’s export engine slowed sharply in March as war in West Asia triggered shocks to energy and transportation costs, hurting global demand and exposing the risks in Beijing’s strategy of leaning on manufacturing to sustain growth. 

 

The world’s second-largest economy surged into 2026 on red-hot AI-fuelled electronics demand, raising expectations it could eclipse last year’s $1.2 trillion record trade surplus. 

 

But the conflict has disrupted global growth, leaving China especially vulnerable as it has relied on foreign demand to offset a prolonged inability to revive consumption at home.

 

Outbound shipments grew by just 2.5 per cent in March, customs data showed on Tuesday, a five-month low, and far below the 21.8 per cent surge seen over the January-February period. Economists had forecast growth of 8.3 per cent in a Reuters poll. 

 

 

“Export growth to major destinations slowed across the board,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, attributing the drop to global uncertainty over the Iran war. “I think China’s trade surplus will shrink this year, as China cannot pass through the higher energy prices completely to foreign consumers,” he added. 

 

The signs are already evident: China's March trade surplus came in at just $51.13 billion, far below expectations of $108 billion. A sharp 27.8 per cent surge in imports - the strongest since November 2021 - weighed on the balance. That compared with a 19.8 per cent increase in January-February and forecasts for 11.2 per cent growth.

 

China’s status as the world’s largest manufacturer and energy im- porter leaves it acutely exposed to a global energy shock. 

 

Diversified supplies and large oil reserves offer some protection, but uncertainty over the conflict's duration risks undermining artificial intelligence- fuelled demand for chips and servers, blurring the growth picture. Even China, long criticised by trading partners for subsidy-backed, cut-price manufacturing, is not insulated.