Record Surplus Driven by Strong Exports

China closed 2025 with a historic trade surplus of $1.19 trillion, the largest on record, as export growth exceeded expectations despite ongoing trade frictions with the United States. According to official customs data, exports rose 6.6% year over year in December in U.S. dollar terms, well above market expectations of 3% and accelerating from November’s pace.

Imports also surprised to the upside, increasing 5.7% year over year in December, their fastest growth in three months. While full-year imports remained broadly flat, the late-year rebound suggests stabilization in parts of industrial demand.

For the full year, exports increased 5.5%, underscoring China’s continued reliance on external demand as a key growth engine.

U.S. Trade Weakens, Diversification Accelerates

Trade with the United States continued to deteriorate sharply. Shipments to the U.S. plunged 30% in December, marking the ninth consecutive monthly decline. On a full-year basis, China’s exports to the U.S. dropped 20%, while imports from the U.S. declined 14.6%.

The data highlights the lasting impact of tariffs and export controls, even as both countries agreed in October to a one-year trade truce that rolled back some restrictions. Despite this agreement, trade flows have yet to meaningfully recover.

In response, Chinese exporters have accelerated diversification toward other regions. Exports to the European Union rose 12% in December, while shipments to ASEAN countries increased 11%. Imports from Europe surged 18%, reinforcing deeper trade ties outside the U.S. corridor.

Global Concerns and Policy Implications

China’s ballooning trade surplus is increasingly drawing global scrutiny. IMF Managing Director Kristalina Georgieva has warned that China’s export-heavy growth model risks exacerbating global imbalances, urging Beijing to boost domestic consumption instead.

Economists caution that sustained surpluses of this scale may provoke defensive trade measures from other countries, potentially increasing protectionism across global markets.

Domestically, China continues to grapple with weak consumer demand, deflationary pressure, and a prolonged real estate downturn. Consumer prices were flat throughout 2025, missing Beijing’s inflation target and reinforcing concerns about household confidence.

Still, stronger exports have helped cushion the slowdown. The World Bank recently raised its 2026 growth forecast for China to 4.4%, citing fiscal stimulus, export resilience, and improving investment sentiment.

Looking Ahead

China is set to release its fourth-quarter and full-year GDP data next week, with economists expecting growth of around 4.5% in Q4. Policymakers are likely to keep macro policy broadly stable in the near term, as external demand continues to offset domestic softness.

At the same time, rising exports of strategic materials such as rare earths, which jumped 32% in December, reinforce China’s central role in global supply chains, even as geopolitical tensions reshape trade flows.

Bottom line: China’s record trade surplus reflects export strength rather than domestic vitality. While diversification away from the U.S. is proving effective in the short term, mounting global pressure suggests the sustainability of this model will remain under close scrutiny in 2026.