Will China’s US$1.2 trillion trade surplus overwhelm global trade?
China’s exports are booming like never before. With a US$1.2 trillion surplus, the world wonders: can global trade absorb it, or is a reckoning on the horizon? Lianhe Zaobao senior correspondent Chen Jing contemplates what China could do next.
Just two weeks into 2026, China’s economic data has stunned the world: against the backdrop of tariff war pressures in 2025, Chinese exports rose rather than fell, with annual trade surplus at a record US$1.2 trillion — the highest in global history.
Simply doing business
The day after these figures were released, Eswar Prasad, a professor at Cornell University and senior fellow at the Brookings Institution, warned in an article on The New York Times that China’s trade surplus posed a greater danger to the free trade system than even US President Donald Trump’s tariffs.
Prasad argued that China’s inexpensive exports not only hit manufacturing in advanced economies, but also made it hard for lower- and middle-income countries to compete. “For the second-largest economy in the world to rely on other countries to prop up its growth will only accelerate the breakdown of the rules-based system,” he wrote.
China’s export of goods has not been backed by gunboats, nor has there been any forced buying or selling, and that “China is simply doing business with the whole world honestly and diligently”. — Hu Xijin, former Editor-in-Chief, Global Times
Hu Xijin, former editor-in-chief of China’s state-run Global Times, wrote on Weibo on 16 January that China’s high trade surplus “has indeed frightened Washington’s elites”, as they have discovered that “China’s economy is extremely resilient; a trade war cannot bring it down”.
Hu added that China’s export of goods has not been backed by gunboats, nor has there been any forced buying or selling, and that “China is simply doing business with the whole world honestly and diligently”.
To fully assess the impact of China’s trade surplus — the difference between exports and imports — the causes must first be clarified. The causes for a large surplus are straightforward: strong exports, weak imports.
Although the China-US tariff war caused China’s exports to the US to fall by 20% last year, its exports to Africa, Latin America, ASEAN and the European Union (EU) all rose sharply, with exports to Africa jumping 25.8%. Besides strong external demand driven by a steady global economy, sustained deflationary pressure on the production side in China, coupled with the depreciation of the RMB, has made the prices of Chinese export goods more attractive.
Risk of pushback from trade partners
In comparison, China’s total imports for the whole of 2025 rose by just 0.5% — far below the 6.1% growth in exports — further widening the trade surplus. Persistently weak domestic demand was the main reason behind the slower import growth.
In the second half of 2025, the growth rate of China’s total retail sales of consumer goods continued to slow, with growth in November falling to 1.3% year-on-year, the lowest in three years. Bogged down by the property sector, fixed-asset investment is also expected to record its first annual decline since records began in 1998. Insufficient stimulus from domestic consumption and investment has made it difficult for imports to expand significantly.
China recorded monthly trade surpluses of over US$100 billion seven times in 2025; that happened only once in 2024, showing that the imbalance of strong exports and weak imports is not a coincidence. A record-high trade surplus is both good news and a troubling signal for China and for the world.
... a high surplus also reflects China’s heavy reliance on exports. If this trend continues, it will exacerbate structural imbalances in the domestic economy, trapping China in a vicious cycle of strong external demand but weak domestic demand.
There is no doubt that a large surplus highlights the resilience of China’s manufacturing sector. Robust exports have helped sustain China’s economic growth, thereby reducing risks to the global economic and financial system. Moreover, against the backdrop of an escalating energy crisis and the reconfiguration of global supply chains, China continues to supply countries around the world with affordable, good-quality goods. This has effectively curbed global inflation, especially by easing price pressures in advanced economies.
At the same time, a high surplus also reflects China’s heavy reliance on exports. If this trend continues, it will exacerbate structural imbalances in the domestic economy, trapping China in a vicious cycle of strong external demand but weak domestic demand. Externally, it could also provoke pushback from trading partners and intensify resistance to Chinese exports.
Need for more balance
Despite the current truce in the China–US tariff war, the staggering trade surplus could prompt Trump to once again wield the tariff stick against China, even as other trading partners become more wary of the world’s second-largest economy.
After China’s trade surplus exceeded US$1 trillion in the first 11 months of last year, International Monetary Fund Managing Director Kristalina Georgieva warned that China’s persistence with an export-oriented growth model could further exacerbate global trade tensions. French President Emmanuel Macron likewise told local media last month that if Beijing fails to address its trade imbalance with the EU, the latter may be forced to take measures such as imposing additional tariffs on China.
That said, Chinese Premier Li Qiang emphasised earlier this month during an inspection tour in Guangdong that China should actively expand imports and promote more balanced development between exports and imports.
Chinese state media also quoted Commerce Minister Wang Wentao this week as saying that China will push for more balanced trade this year by actively expanding imports through measures such as coordinated trade fairs and targeted procurement.
Whether a high trade surplus proves a blessing or a curse for China and the world ultimately depends on whether export earnings can flow back into domestic demand, whether exports can drive import growth and whether they can be transformed into greater market opening.
Blessing or a curse?
Judging from these high-level statements, Beijing will not sit by and allow the trade surplus to continue expanding. As China enters 2026, it has also stepped up efforts to ease trade tensions, especially with regard to the “new three” products — electric vehicles, lithium-ion batteries and solar cells — that have drawn the strongest resistance from other countries.
Earlier this month, the Chinese government announced that from April 2026, it will cancel export VAT rebates for photovoltaic products, lower rebate rates for battery products, and eliminate such rebates starting next year. This week, China and the EU also reached an understanding on a “soft landing” for EV tariffs, allowing Chinese automakers to replace anti-subsidy tariffs with minimum price commitments.
Whether a high trade surplus proves a blessing or a curse for China and the world ultimately depends on whether export earnings can flow back into domestic demand, whether exports can drive import growth and whether they can be transformed into greater market opening. The reality is clearly not as optimistic as Hu Xijin has predicted, but perhaps it is also not as alarming as Prasad fears.
This article was first published in Lianhe Zaobao as “中国高贸易顺差是福是祸？”.
