Short-term fluctuations have indeed boosted export growth early in the year, but even after removing disruptive factors, export performance remains robust, demonstrating the strong resilience of China's exports. The market's long-term underestimation of exports may stem from delayed recognition of structural shifts in volume and pricing, industrial transformation, global expansion, and new growth drivers.

According to data released by the General Administration of Customs, China's exports denominated in U.S. dollars increased by 21.8% year-on-year from January to February, significantly exceeding market expectations of around 7%. This strong start not only surpassed institutional forecasts but also highlighted the divergence between the resilience of China's exports and market projections.

Over the past few years, export data has repeatedly outperformed expectations, yet the market has maintained a cautious stance, resulting in a prolonged and systematic underestimation. The key question is whether the current export surge is due to short-term factors or a genuine improvement in export competitiveness—and why the market continues to underestimate China's export growth.

In short, the stronger-than-expected export performance in January and February resulted from a combination of factors, including the timing of the Lunar New Year, policy-driven front-loading, recovering external demand, and industrial upgrading. While short-term factors have temporarily boosted growth rates, the underlying strength of exports remains evident even after adjusting for these influences.

The market's persistent underestimation likely reflects a lag in understanding changes in volume-price dynamics, industrial transformation, global supply chain strategies, and emerging growth drivers. China's exports have shifted from a reliance on low-cost, high-volume models to a new phase characterized by higher quality, increased market share, diversified markets, and advanced manufacturing.

This fundamental restructuring will not only shape export performance for the foreseeable future but will also continue to influence macroeconomic trends and capital market valuations. For investors, rather than focusing on month-to-month data fluctuations, it may be more productive to concentrate on the long-term theme of export upgrading and identify opportunities within this structural transformation.

Export Growth Exceeds Expectations

The strong export performance in January and February was driven by a combination of short-term seasonal factors, policy expectations, and improving external demand. The most visible factor was the technical boost from the timing of the Lunar New Year. In 2026, the holiday fell on February 17, the latest since 2016, creating a noticeable pre-holiday shipment rush and a low base effect from the previous year.

With an earlier Lunar New Year in 2025, factory shutdowns and logistics delays had already impacted that year's baseline. In contrast, the later holiday in 2026 allowed for more working days in January and a concentrated shipment period in February, lifting the overall export reading for the two-month period. Multiple institutions estimate that the holiday timing contributed approximately 7 percentage points to the year-on-year growth rate, suggesting that some of this surge may moderate in March.

Even after accounting for seasonal factors, however, export growth remained in the double digits, indicating genuine support from external demand and industrial capacity. Beyond seasonal influences, policy expectations also played a role. With U.S.-China trade tensions easing, exports to the United States showed signs of recovery, narrowing the decline. Additionally, anticipated adjustments to export tax rebates prompted some companies to accelerate production and customs declarations, boosting short-term export volumes.

While these policy-driven actions are temporary, they also reflect Chinese firms' ability to quickly adapt to global market changes. If seasonal and policy factors represent the "surface-level" drivers of export growth, then recovering global demand and domestic industrial upgrading serve as the "underlying momentum." Since the beginning of 2026, global manufacturing PMI has remained in expansionary territory, with key exporters like South Korea and Vietnam also showing strength, signaling a rebound in global trade.

Within this improving environment, China's export structure has become increasingly advantageous. Customs data show that exports of mechanical and electrical products grew by 24.3% year-on-year in January–February, accounting for over 70% of total export growth. Integrated circuit exports surged by 72.6%, benefiting from global demand for AI computing power, while automobiles and ships grew by 67.1% and 52.8%, respectively, highlighting the strong expansion of high-end equipment manufacturing.

At the same time, export market diversification continued to show results, with rapid growth in shipments to ASEAN, the European Union, Africa, and Belt and Road Initiative countries. This diversification has helped mitigate risks from reliance on any single market, enhancing the overall stability of exports.

Market Continues to Underestimate Export Growth

Beyond the impressive data, a more important question is why the market has consistently underestimated China's export growth over an extended period. This expectation gap is not accidental and may result from a combination of analytical frameworks, structural perceptions, and risk pricing.

The market has long relied on year-on-year growth rates in U.S. dollar terms to gauge export strength but often overlooks a key detail: from 2023 to 2025, export price indices continued to decline, dampening nominal growth rates, while export volumes and global market shares measured in physical terms continued to rise. Judging export strength solely based on price declines can lead to a "data illusion," underestimating true export competitiveness.

Deeper forecasting errors may stem from outdated perceptions of export structure. Many analyses still equate Chinese exports with traditional labor-intensive goods, overlooking transformative changes brought by industrial upgrading. In recent years, the share of capital- and technology-intensive products in exports has steadily increased. New energy vehicles, semiconductors, and high-end equipment have evolved from growth segments to core pillars, with resilience and anti-cyclical capabilities far exceeding those of traditional goods.

When the market applies old structural assumptions to new trends, it naturally underestimates potential export growth. Similarly, external risk assessments often skew pessimistic, focusing on overseas recessions or trade tensions while underestimating Chinese firms' adaptability in global layout, capacity optimization, and product upgrading—as well as the growth potential offered by emerging markets.

From a modeling perspective, traditional macroeconomic frameworks have been slow to incorporate new variables, such as the AI industry boom, global reindustrialization, and restructuring of intermediate goods trade. This lag further widens the gap between expectations and reality.

In essence, the market's persistent underestimation of exports reflects an attempt to understand a deeply transforming export system using outdated perspectives and models. Looking ahead, as seasonal and front-loading effects fade, export growth may moderate in March, but this does not signal a reversal of export momentum. The underlying resilience of China's exports remains strong.

For capital markets, stronger-than-expected exports not only improve industrial profits, support manufacturing investment, and alleviate low inflation pressures but also help correct long-standing cognitive biases. This shift may encourage a transition from a "cyclical downturn" mindset to a new paradigm centered on "structural upgrading and market share expansion."