China's Trade Surplus Approaches $1 Trillion as Exports Rise

The trade deficit expanded to $133.53 billion in September from $119.1 billion in August, marking the largest monthly gap in 20 months. The cumulative trade surplus from January to September stood at $938.11 billion, indicating that China is on track to exceed the $1 trillion mark sooner than it did the previous year. In 2025, the trade surplus reached $1.189 trillion, occurring in November.

Technology and transportation goods have played a crucial role in driving China’s export growth in 2026. Notably, demand for technology exports, including semiconductors and automatic data processing equipment, has surged due to increased global investment in artificial intelligence infrastructure. Lynn Song, chief economist for Greater China at ING, highlighted that as China advances in high-value products, lower-end manufacturing is shifting to other regions.

Regional trade patterns have also evolved; the US accounted for 10.3% of China's exports in the first nine months of 2026, a significant decline from 19.2% in 2018, while ASEAN has become China’s largest export market. In September, shipments to the US jumped 39.6% year-on-year, contributing to a 9.8% growth over the nine-month period. This rebound is attributed to a trade truce between the US and China, which will remain in effect until January 2027, alongside tariff reductions on $30 billion worth of goods.

Exports to ASEAN increased by 52.3% in September, elevating nine-month growth to 28.7%. Shipments to the EU rose 25.3% in September, reflecting the fastest growth in seven months, while exports to South Korea soared by 68.2%, the largest growth since 2021. Song cautioned that the emphasis on technology goods in the import growth suggests a narrow recovery, not a broader sector-wide rebound.

Despite booming foreign trade, China's domestic economy continues to face challenges, particularly in household spending and capital investment. The International Monetary Fund (IMF) revised its 2026 GDP growth forecast for China down to 4.5%, from 4.6%, citing weak consumption and investment amid ongoing property market difficulties. The IMF projects that growth will further decline to 4.0% in 2027.

Nomura characterized the current economic landscape as marked by significant domestic weakness, with key indicators remaining low. It expects a marginal contribution of 1.2 percentage points to GDP growth from net exports in 2026, compared to 1.4 points in 2025, highlighting the importance of foreign demand. Nomura forecasts a $1.161 trillion trade surplus for 2026, following a record $1.189 trillion in 2025, with an anticipated increase to $1.272 trillion in 2027.

The growing trade surplus has led to increased scrutiny from trading partners. In September, China recorded a $34.8 billion surplus with the EU and a $34.01 billion surplus with the US, the largest in 20 months. Recent agreements between the EU and China aim to regulate Chinese hybrid vehicle exports, with specifics expected in December.

Song noted that while the current trade environment is relatively stable, risks could escalate in 2027 if global technology investment slows or new tariffs are enacted, particularly as China becomes increasingly reliant on foreign demand. Nomura flagged various risks, including US-China relations and domestic policy support, emphasizing that a significant decline in exports would undermine one of the economy’s key strengths and exert additional pressure on Beijing to enhance domestic demand.

Source: IndexBox Market Intelligence Platform