Trade Surplus Tops One Trillion USD: New Challenges For China’s Foreign Trade | Instant Commentary

China’s General Administration of Customs recently released data showing that, in the first eleven months of 2025, the country’s goods trade surplus reached USD 1.08 trillion, marking the first time the surplus has exceeded the USD 1 trillion threshold. This milestone carries both symbolic and practical significance for China’s role in global commerce.

Measured against national economies, a USD 1.08 trillion surplus is comparable to the full‑year GDP of South Korea or Canada in 2024, underscoring a substantive shift in China’s position within the international trade system. Despite headwinds such as U.S. tariff measures and broader reconfiguration of global trade, Chinese exports demonstrated notable resilience: exports totaled USD 3.41 trillion in the first eleven months, up 5.9% year‑on‑year.

Regional diversification helped sustain this performance. Steady export growth to ASEAN and the European Union offset declines to the United States, while shipments to Africa expanded by 26.3%, indicating that China’s strategy to broaden export markets is producing tangible results.

The long arc of China’s trade development is evident in the composition of current exports. Over the past four decades, China’s export base has evolved from labor‑intensive goods such as textiles and toys to higher‑value manufactured products. The first eleven months of 2025 reinforce that transition: electromechanical products accounted for RMB 14.89 trillion of exports, up 8.8% and representing 60.9% of total exports. Integrated circuits reached RMB 1.29 trillion, up 25.6%, and automobile exports totaled RMB 896.91 billion, up 17.6%. New energy vehicles, photovoltaic products and communications equipment are increasingly prominent in China’s export mix.

Nevertheless, structural vulnerabilities remain. China continues to rely heavily on imports for certain high‑end technologies. In the first eleven months of 2025, electromechanical imports amounted to RMB 6.69 trillion, up 5.5%, reflecting ongoing dependence on advanced process chips, precision instruments, high‑end medical devices, specialty chemical inputs and aircraft engines. This pattern—importing high‑end components while exporting mid‑to‑high‑end manufactured goods—indicates that China occupies a mid‑to‑upper position in global manufacturing but has not yet secured leadership in the highest‑value segments of the value chain.

When services trade is taken into account, China’s overall trade position becomes more comparable to that of Germany. Germany’s export profile, concentrated in high‑value sectors such as automobiles, precision machinery and advanced equipment, is supported by a long‑standing surplus in services trade, particularly in knowledge‑intensive professional services. That dual strength—high‑tech goods plus services surpluses—provides Germany with a resilient growth model that China can study as it seeks to rebalance its own trade structure.

China’s demographic scale and employment considerations, however, complicate the path to rapid structural change. A large population and significant labor‑market pressures mean that exports of mid‑ and low‑end goods will remain important for some time, both for foreign‑exchange earnings and for job preservation. Traditional labor‑intensive sectors such as textiles, apparel and plastics, while reduced to 15.1% of total exports, continue to underpin incomes in many regions and serve as a social stabilizer. Over the longer term, though, reliance on low‑cost advantages is increasingly constrained by environmental limits, resource availability and rising competition from countries such as India and Vietnam, making a gradual shift toward higher‑value activities imperative.

Policymakers face the dual task of maintaining employment and macroeconomic stability while promoting industrial upgrading and structural transformation. The objective is not merely to expand trade volumes but to climb the value chain—moving from price‑based competition to technology‑ and innovation‑driven competitiveness—so that growth becomes more sustainable and less resource‑intensive.

A very large trade surplus also carries external and domestic risks. Historically, persistent surpluses have provoked trade tensions and policy responses from trading partners. Japan’s large surpluses in the 1980s, for example, contributed to international pressure that culminated in the Plaza Accord and a prolonged period of economic stagnation. Following the announcement of China’s USD 1 trillion surplus, critical responses from some U.S. and European political and business figures have already surfaced, reflecting concerns about global imbalances. Such reactions can translate into anti‑dumping investigations, tariff measures and technology restrictions. Recent trade frictions between China and other major economies often have imbalances at their core.

Concrete policy responses abroad illustrate the potential for escalation. Mexico recently approved a tariff package to take effect in January 2026 that covers 1,400 tariff items; the measure passed with 281 votes in favor, 24 against and 149 abstentions. Under the new rules, tariffs on Chinese automobiles and parts could rise to 50%, steel to 35%, footwear to 50% and textiles and clothing up to 50%. Large and persistent foreign‑exchange inflows associated with a substantial surplus can also fuel expectations of RMB appreciation, erode price competitiveness for labor‑intensive exports and complicate domestic monetary management by increasing base‑money issuance, with attendant inflationary and asset‑bubble risks.

Domestically, an export‑centric growth model can crowd out the development of robust domestic demand and lead to an unbalanced investment structure. In the first eleven months of 2025, China’s contribution from consumption to GDP growth remained below levels typical of advanced economies, reflecting the long‑standing emphasis on external demand. Moreover, part of the surplus expansion this year reflects lower import prices for key commodities. Customs data show that from January to October 2025 China imported 471.35 million tons of crude oil, up 3.1% year‑on‑year, with import value of USD 24.51 billion, down 10.2% and an average price of USD 520 per ton, down 13.0%. Iron ore imports reached 1.03 billion tons, up 0.7%, with import value of USD 99.37 billion, down 10.8% and an average price of USD 96.6 per ton, down 11.4%. These price declines have mechanically widened the goods trade surplus to some extent.

From a global value‑chain perspective, an outsized surplus can signal that a country is concentrated in manufacturing stages that capture relatively low shares of final value, while research, design and brand‑related activities remain concentrated in advanced economies. If the “smile curve” remains anchored at the lower end, China risks expending disproportionate environmental and labor resources while securing only a modest share of value. Modern economic analysis emphasizes the dynamic benefits of balanced trade; moderate deficits can reflect strong domestic demand, openness and outward investment, as exemplified by the United States, which has sustained trade deficits while maintaining innovation capacity and economic dynamism.

Trade should be understood as a mutually beneficial process rather than a zero‑sum contest. China’s policy focus should therefore shift from maximizing a headline goods surplus to cultivating a more balanced and sustainable trade structure. This entails expanding high‑quality imports, promoting services exports, encouraging outward investment and moving into higher‑value segments of global value chains.

The USD 1.08 trillion goods surplus in 2025 highlights China’s central role in global trade and the competitiveness of its manufacturing sector. The nation’s evolution from low‑value exports to higher‑value manufacturing is a notable achievement. Yet celebrating this milestone should be accompanied by sober reflection: a larger surplus is not an unqualified good, and the strategic priority must be to transform China from a large trading nation into a truly strong one by upgrading the trade structure and enhancing value‑chain positioning.