Recently, the General Administration of Customs of the Communist Party of China (CPC) has loudly claimed to have achieved record-breaking exports and trade surplus, however, the international balance of payments data released by the State Administration of Foreign Exchange at the end of last year reveals a different economic picture. Experts point out that the apparent “surplus glory” of China’s economy in foreign accounts is highly concentrated in merchandise exports, and the unprecedented trade surplus reflects distortions in CPC policies, bringing about multiple risks.
According to data released by the State Administration of Foreign Exchange of the CPC on December 31, 2025, China’s current account surplus for the first three quarters, which mainly includes trade in goods and services, showed a surplus of $492.8 billion, with a goods trade surplus of $726.1 billion and a services trade deficit of $155.8 billion. At the same time, the financial account recorded a deficit of about $518.1 billion, indicating continued pressure from capital outflows.
In comparison, the General Administration of Customs of the CPC recently announced that the annual trade surplus for 2025 soared to 8.51 trillion yuan, approximately $1.2 trillion, an increase of 20% from the previous year, reaching a historical high for two consecutive years.
However, Chinese current affairs commentator Wang He bluntly told reporters, “This trade surplus is only in goods trade, while China’s trade in services is in deficit, so the overall international balance of payments does not look as good as the data suggests.”
“From the perspective of macroeconomics, one of the country’s important indicators is the balance of international trade, not the more trade surplus, the better,” he pointed out, emphasizing export performance excessively may actually conceal worsening issues in the domestic economic structure.
Data also shows that the high export surplus has not translated into a substantial increase in foreign exchange. The significant trade surplus in the trillions of dollars for two consecutive years shows a noticeable discrepancy with foreign exchange reserves. Official figures indicate that foreign exchange reserves increased by $155.9 billion at the end of 2025 compared to the previous year-end, while it decreased by $35.6 billion at the end of 2024. Wang He believes this reflects a large amount of funds being trapped overseas and not flowing back into the domestic Chinese economy.
Regarding China’s record trade surplus, American economist Davy J. Wong warned that over-reliance on the surplus model from exports may lead to three major long-term risks: escalating trade frictions, worsening overcapacity, and further imbalance in the economic structure, even increasing deflationary pressures.
Several international institutions have pointed out that China’s economy is showing a structural contradiction of “strong exports, weak consumption.” Economist Sarah Tan from Moody’s Analytics stated that while the growth figures may seem stable on the surface, the underlying situation is not optimistic, with households and businesses choosing to adopt a watchful stance amidst weak domestic demand.
Since the collapse of the real estate industry in 2021, the Chinese property market has been in a slump for four consecutive years, with prices falling over 20% from their peak, significantly denting consumer confidence.
In response, Davy J. Wong pointed out that the other side of the expanding surplus is reduced imports and insufficient consumption. “With reduced imports and minimal impact on exports, the situation leads to a growing surplus, reflecting weak domestic demand.”
Amid prolonged weak domestic demand, Beijing has increasingly relied on exports as the main support for economic growth in recent years. According to Reuters, China’s economy grew by 4.5% in the fourth quarter of last year, marking a three-year low, primarily impacted by sluggish consumer demand and investment.
Reports indicate that China’s fixed-asset investment shrank by 3.8% in 2025, marking the first annual decline since 1996. Private investment also dropped by 6.4%. Companies lack expansion impetus in an environment of overcapacity, while households tend to save rather than consume.
The People’s Bank of China announced monetary easing measures on the 15th, including a 1 trillion yuan (approximately $144 billion) financing plan for private enterprises. However, analysts point out that credit supply has been abundant for years, and the real deficiency lies in demand.
While most developed countries are striving to curb inflation, China has been facing deflationary pressures in recent years, with consumer prices rising only by 0.8% in 2025.
Davy J. Wong bluntly stated that Beijing’s long-term economic strategy is skewed towards state capital and state will, showing little concern for the general population’s consumption. In an environment with low social security and high tax burdens, household consumption struggles to sustain significant momentum.
Neil Shearing, head of the team of economists at Capital Economics, pointed out in a report in July last year that the core issue of China’s economy lies in long-term weak domestic consumption, with high savings and low consumption leading to a situation where a large number of products can only be exported globally at extremely low prices.
Shearing estimates that around 30% of Chinese manufacturing enterprises are currently operating at a loss, relying on local subsidies and low-interest financing from the central government to survive, creating a large number of “zombie enterprises.”
His research indicates that after significant price increases during the epidemic, export prices in most countries have remained relatively stable in recent years, but China’s export prices have plummeted by over 20%, highlighting price competition as the main means to sustain exports and further weakening corporate profits and long-term competitiveness.
Wang He also pointed out that this low-price export model not only compresses corporate profits but is also detrimental to Chinese enterprises themselves, “not sustainable in the long run.”
As low-priced goods flood the market, tensions are escalating among various countries. In 2025, the China-US trade volume was $559.7 billion, a decrease of 18% year-on-year, with exports decreasing by 20%.
A report from Capital Economics noted that apart from developed countries like the United States, the European Union, and Japan being affected, emerging markets with labor-intensive industries are also facing erosion from Chinese competition.
According to a report by Nikkei, China’s exports to Belt and Road countries increased by 11.6% annually, with the trade surplus accounting for 45% of the total surplus. The report indicated a 25.6% increase in exports to South Africa and a 13.4% increase in exports to Southeast Asia.
Shearing stated that industrial clashes are not only focused on products like electric vehicles and technology but have also expanded to mid-to-low-end manufacturing industries. As trade frictions intensify, it is no longer just a US-China issue, signaling that China’s growth engine is transitioning from global dividends to a source of geopolitical friction.
On the other hand, Wang He questioned, “A significant portion of China’s trade surplus involves lending money to the other party to purchase Chinese goods.” However, the uncertainty remains high as to whether the borrowing countries will be able to repay as scheduled and if there are risks of debt default.
He pointed out that the current international community faces “China Shock 2.0.” Besides the ongoing tariff increases by the United States, Mexico has raised tariffs on some Chinese products to 50%, while the European Union, India, and other countries have initiated anti-subsidy and trade investigations.
He stressed that China has now become the primary target of global bilateral trade investigations, and “the entire international economic situation is becoming increasingly tense.”
Many experts have expressed that China’s high surplus not only fails to correct the internal economic imbalances but could instead become a source of heightened external friction and internal risks concurrently.