AI Demand Powers China Factory Activity as High-Tech Exports Offset Geopolitical Headwinds
7 Sources
[1]
Global AI wave revs up Asian factories, offsetting war-induced pain
TOKYO, July 1 (Reuters) - The global AI boom powered Asia's manufacturing sector in June, with brisk demand for technology-related goods offsetting the drag from the Iran war, private surveys showed on Wednesday, offering some relief for the region's export-reliant economies. Price pressures,
[2]
China's factory activity expands in June with boost from tech exports
HONG KONG (AP) -- China's factory activity picked up pace in June, an official survey showed Tuesday, as demand for artificial intelligence hardware made exports robust. The official manufacturing purchasing managers index, or PMI, expanded to 50.3 from 50 in May, better than economists'
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China factory activity grows faster than expected in June on tech export demand
China's manufacturing activity picked up faster than expected in June buoyed by strong demand for high-tech exports amid global AI boom. The official purchasing managers' index edged up to 50.3 in June, beating economists' forecast of 50.1, returning to the expansionary territory above the
[4]
AI hardware demand keeps Asia's factories humming as the Iran war bites
June surveys show orders for chips and data-centre kit offsetting a costly Middle East conflict, at least for now. Asia's factories grew again in June, and the global scramble for AI hardware is doing much of the lifting, according to survey data published this week. Brisk demand for chips,
[5]
China's factory activity expands in June on high-tech exports
BEIJING, June 30 (Reuters) - China's factory activity returned to expansion in June, an official survey showed on Tuesday, driven by strong high-tech manufacturing exports linked to the AI boom, even as shipments of other goods remained weak alongside subdued domestic demand. The official
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AI Boom Continues to Fuel Asia Factory Activity But Divide Is Widening
Gauges of factory activity in Asia largely rose to close out the first half of the year, driven by a global surge in artificial-intelligence hardware demand. However, mounting cost pressures and disparities in the AI boom cloud the outlook. S&P Global purchasing managers indexes released Wednesday
[7]
China factory activity returns to expansion riding AI global boom
BEIJING, June 30 (Reuters) - China's factory activity returned to expansion in June, driven by demand for chips, computers and other AI-related products, as robust export orders and front-loading to the United States to get ahead of tariffs offset weakness elsewhere in the economy. The data
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China's manufacturing sector expanded for the seventh straight month in June, driven by surging demand for AI hardware including chips and data-center equipment. The official PMI reached 50.3, exceeding forecasts despite weak domestic consumption and rising costs from the Iran war. High-tech exports are now the primary engine keeping Asia's factories running.
China Factory Activity Expands on AI Hardware Demand
China factory activity returned to expansion in June, with the official manufacturing Purchasing Managers' Index (PMI) rising to 50.3 from 50.0 in May, beating economist forecasts of 50.1 and marking a seventh consecutive month above the 50-mark that separates growth from contraction
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. The expansion in factory activity was driven primarily by AI demand for semiconductors, servers, and data-center equipment, with high-tech manufacturing posting a PMI of 53.5, significantly outpacing the headline reading4
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Source: Reuters
The RatingDog General Manufacturing PMI hit 51.7 in June, easing slightly from 51.8 in May but exceeding analyst forecasts of 51.6
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. This performance reflects how the global AI wave is reshaping China's manufacturing sector, with brisk orders for chips and automated data processing equipment acting as a critical buffer against mounting geopolitical risks and weak domestic consumption.High-Tech Exports Drive China's Economic Recovery
High-tech exports linked to the AI boom have become the main engine of growth for China's manufacturing sector, even as shipments of other goods remained weak
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. The sub-index for new orders climbed to 51.2 in June from 49.9 in May, while the production sub-index expanded to 51.4 from 51.22
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Source: Reuters
The contrast in export performance is striking. Shipments of automated data processing equipment jumped 60% year-on-year in May, while exports of furniture grew just 1.9% in value terms over the same period
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. This disparity underscores how AI-driven demand for technology goods is creating an unbalanced growth pattern, with enormous international demand for semiconductors powering data centres playing to China's manufacturing strengths.Global AI Wave Lifts Asia's Factory Floors
The surge in AI hardware demand extended beyond China, with Japan's PMI rising to 54.8 in June from 54.5 the previous month, marking a sixth consecutive month of expansion with new orders growing at their fastest pace in more than two years
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. South Korea's factory activity also expanded for the seventh consecutive month, though at a slower pace than in May.Smaller Asian economies followed the trend. The Philippines held steady at 50.9 in June from 50.8 in May, while Malaysia climbed back into expansion at 50.7 from 49.9
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. Taiwan and Vietnam also saw factory activity expand, demonstrating how surging demand for AI hardware is keeping order books full across the region despite elevated costs from the Iran war.Related Stories
Domestic Demand Remains Weak Amid Property Downturn
Despite the strength in exports, domestic demand continues to weigh on China's economic recovery. Retail sales fell for the first time in over three years in May, while new home prices declined at a faster pace
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. Chinese consumers have remained cautious after a years-long property sector downturn, leaving the $20 trillion economy heavily dependent on external demand.Julian Evans-Pritchard, head of China economics at Capital Economics, noted that "China's economy has regained some momentum lately. But this remains heavily dependent on exports and AI-related tech"
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. Lynn Song, chief economist for Greater China at ING Bank, suggested that further policy support from the Chinese government to boost domestic consumption and investment would be beneficial to avoid an increasingly unbalanced growth pattern.Rising Costs and Geopolitical Risks Cloud Outlook
While AI demand provides a powerful buffer, price pressures remained elevated as supply shortages and shipping delays lengthened lead times, suggesting the energy shock tied to the Iran war could intensify across the region in coming months
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. Input cost inflation in Japan stayed at a nearly four-year high in June, a sign of mounting price pressures that could crimp corporate margins.U.S. tariffs also loom as a concern. Exporters accelerated shipments bound for the U.S. ahead of new Section 301 tariffs taking effect from late July, with front-loading contributing to June's strong performance
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. A May meeting between U.S. President Donald Trump and Chinese leader Xi Jinping produced no meaningful breakthroughs on tariffs, leaving supply chain uncertainty in place.There is also concentration risk buried in the positive data. Growth leaning this heavily on one demand cycle leaves factories exposed if AI spending cools or export controls tighten
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. Washington's curbs have already pushed China's AI chip effort away from GPUs toward custom silicon, reshaping what the region's fabs are asked to build. Whether the AI-driven momentum holds through the second half of 2026 remains the critical question for Asia's export-reliant economies.References
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