China AI Exports Could Weather Full US Decoupling, Citi Says
Analysts estimate even an extreme scenario would put less than 10% of Chinese exports at risk, though open-weight model restrictions pose uncertainty.
China's AI export vulnerability less severe than feared
China could manage a complete artificial intelligence decoupling from the United States without catastrophic economic damage, according to new analysis from Citi Research. The Hong Kong-based team estimates that even an extreme-case scenario would place roughly 9.2 percent of China's total exports at risk—a figure they describe as manageable given Beijing's track record navigating previous trade shocks.
The assessment comes as bilateral tech tensions escalate ahead of President Xi Jinping's planned September state visit to the US. Both nations have imposed reciprocal measures since last month, with Washington targeting Chinese AI models, advanced robotics, and optical transceivers while expanding forced labor blacklists. Beijing has responded with its own restrictions on American firms.
Direct AI trade already suppressed
Led by analyst Yu Xiangrong, the Citi team argues that Washington's latest restrictions are "unlikely to materially disrupt China's AI exports" because direct bilateral trade in the sector has already contracted significantly. Between January and June, Chinese AI-related exports to the US fell 4.1 percent year-over-year, subtracting half a percentage point from overall export growth.
The analysts note that direct US-China AI trade has largely decoupled at the aggregate level, which limits the potential first-order impact of additional restrictions. For context, the US accounted for 14.7 percent of China's total exports at the end of 2024, yet Beijing weathered President Donald Trump's "Liberation Day" tariffs during that period.
Most recently, Trump signed a proclamation Thursday imposing tariffs up to 100 percent on certain imported drones and components, citing national security and cybersecurity concerns.
Why it matters
While the headline finding suggests resilience, Citi's analysis highlights a critical uncertainty: restrictions on "open-weight" AI models represent what the analysts call a "genuine wild card" that could fundamentally reshape the global technology landscape. Unlike traditional export controls on chips or hardware, limiting access to open-weight models—AI systems whose parameters are publicly available—could fragment the development ecosystem in ways that extend far beyond bilateral trade flows. This distinction matters for multinational companies planning AI strategies and policymakers weighing the second-order effects of technology restrictions.
Indirect benefits persist
Despite the bilateral contraction, China remains an indirect beneficiary of the broader global AI boom, according to the Citi analysis. This suggests Chinese companies continue to participate in AI supply chains and capture value through third-country trade relationships, even as direct US market access narrows.
The findings were detailed in a Friday research note first reported by the South China Morning Post.
This is an original analysis by the Omega editorial team. Source reporting: AI Watch.
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