China's monthly car exports surpassed 1 million units for the first time in June, as overall overseas shipments from the world's second-largest economy rose 27%, according to official customs data. The stronger-than-expected trade performance keeps China on track to match or beat last year's record trade surplus of $1 trillion (£748bn), achieved despite lingering tariff tensions with the US.
Booming Overseas Sales of Chinese Brands
Sales of Chinese automotive brands, ranging from BYD to Jaecoo, are booming globally, eroding the market shares of long-established automakers, particularly in Europe. The surge in exports includes electric vehicles and hybrids, which have avoided the EU's 2024 tariffs on Chinese EVs, putting significant pressure on European manufacturers.
Analysis by the Mercator Institute for China Studies (Merics) in Berlin shows that China ran a €900m-a-day goods surplus with the EU in the first half of 2026, risking heightened tensions with both the US and the EU. The EU has previously accused China of 'weaponising' trade as foreign policy.
Trade Surplus with EU Hits Record Levels
Exports to the EU increased 12.7% year-on-year, pushing the surplus to 1.225tn yuan (£135bn). Rafael Jimenez Buendía, a trade expert who analysed the figures for Merics, said the export surge into the EU beat its own forecast of record sales. The data released on Tuesday put the first-half surplus at 2.165tn yuan, 45bn yuan ahead of the expected 2.12tn yuan.
Volkswagen, Europe's largest car manufacturer, is planning to reduce its 670,000-strong workforce by up to 100,000 as part of wide-ranging restructuring plans. While proposals to close four plants were not approved by the board, their future remains under discussion. CEO Oliver Blume called this the 'most comprehensive realignment in the company's history.'
Broader Export Growth Driven by AI Chip Demand
China's export rise was also fuelled by orders for semiconductors amid a global AI boom, with data showing exports of 32 billion integrated circuits. The high export figures have been partly attributed to continued suppressed domestic demand, fuelling fears of a 'China shock 2.0'—a repeat of the export surge seen in the 2000s to the US.
According to a recent report by Gavekal Dragonomics, the ratio of annual exports to total manufacturing sales hit 24% over the first four months of this year, the highest level since China's accession to the World Trade Organization in 2001. In 2019, the ratio stood at 18.3%, rising to 22.3% last year. 'That would be considered high for a small export-focused country; for the world's second largest economy, it is remarkable,' the report stated.
