Shenwan Hongyuan: 60% of China's Import Growth This Year Comes from AI Revolution, 40% from Oil and Gold Price Fluctuations

Since the beginning of the year, China's import growth has accelerated significantly. This analysis examines the composition of China's imports, the contribution of AI-related goods to the import surge, and other key drivers beyond AI.

1. What Is China Importing? A Breakdown by Product, Region, and End-Use

Product Structure: Dominance of Producer Goods

China's imports are primarily composed of producer goods. The ranking by share is as follows:

• Non-AI producer goods: 52.1%
• AI-related producer goods: 29.0%
• Other consumer goods
• Jewelry and precious metals

From January to August, within AI-related producer goods, semiconductor devices and data processing equipment parts accounted for the largest shares. Among non-AI producer goods, metals and energy were dominant, while in consumer goods, precious metals, jewelry, and food took the lead.

Regional Structure: Emerging vs. Developed Economies

• Emerging economies account for 70% of imports, primarily intermediate goods (78.8%), including AI-related goods, crude oil, and minerals. Capital goods from these regions represent only 6.2%.
• Developed economies account for 30% of imports, with a higher share of capital goods (31.8%), such as AI equipment, machinery, and chemicals—reflecting high-end manufacturing.

End-Use Structure: Exports vs. Domestic Demand

Imports are used for:

• Exports: 55.2%
• Investment: 23.4%
• Consumption: 21.4%

However, domestic-demand-driven imports are not broadly linked to total consumption or investment. Consumer imports are mainly gold and food, tied to specific demand. Investment imports are largely non-ferrous metals used in electronics production, linked to equipment investment.

2. How Much Did AI Contribute to the Import Surge?

From January to August, AI-related imports contributed approximately 50% of total import growth.

The transmission chain is: Global AI revolution → Boost to China's AI exports → Increased AI-related imports.

• AI producer goods contributed 13.8 percentage points to total import growth year-on-year.
• This was driven by China's role as a processing hub in the global AI supply chain, increasing demand for semiconductor equipment and data processing components.

Changing Price-Volume Dynamics

• In Q1, AI import growth was driven by volume, which accounted for 97% of the increase.
• Since April, the dynamic shifted: prices rose sharply, with price growth accelerating by 40.7 percentage points to 41.7%, while volume growth slowed by 16.5 percentage points to 19.1%.

Regional Impact

Strong import growth from South Korea, ASEAN, and India was also linked to AI:

• South Korea: AI producer goods contributed over 90% of import growth.
• ASEAN: Similar patterns were observed.

These regions contributed 4.6 and 4.4 percentage points respectively to total import growth.

3. What Else Is Driving Import Growth Beyond AI?

In addition to AI, non-AI producer goods and precious metals are key contributors.

From January to August:

• Non-AI producer goods contributed 5.2 percentage points to total import growth.
• Precious metals and jewelry contributed 6.7 percentage points.

Breakdown of Non-AI Producer Goods

| Category | Contribution (pp) | |----------|------------------| | Energy | 0.5 | | Metal ores and products | 3.6 | | Pharmaceuticals and chemicals | 0.7 |

• Energy imports rose due to oil price surges: price growth increased by 25.2 pp to 12.0%, while import volumes fell by 19.5 pp to -15.5%.
• Metal imports were driven over 70% by copper and AI-related metals, aligning with growth in domestic electronics production and equipment investment.

Consumer Goods: Gold, Not Consumption

Over 80% of consumer goods import growth came from precious metals and jewelry, primarily gold. This does not reflect stronger domestic consumption, but rather a "gold speculation frenzy" driven by surging gold prices.

Historically, precious metal imports tracked retail sales of related goods. However, in 2024, precious metal imports have far outpaced retail sales growth, suggesting that enterprises are importing gold directly for speculative purposes, bypassing retail channels.

Summary: Three Key Drivers of Import Growth

• 60% of the import surge is linked to the global AI revolution:
• Direct effect: AI product imports contributed 13.8 pp
• Indirect effect: Domestic equipment investment and non-ferrous metal imports contributed 2.6 pp
• Total AI contribution: 16.4 percentage points

• 40% is driven by price fluctuations:
• Oil prices (geopolitical factors)
• Gold prices (speculation and market volatility)

These factors—along with chemicals and other commodities—have collectively propelled China's import growth in 2024.