China closed 2025 with a trade surplus that has no historical parallel. At roughly $1.2 trillion, it became the largest surplus ever recorded by any economy, underlining the country’s continued dominance in global manufacturing and exports.
The figure arrived at a time when China’s domestic economy remains under pressure from weak consumption, deflation risks, and a prolonged property downturn.
Strong external demand has once again acted as a stabiliser, masking internal challenges while simultaneously drawing growing international scrutiny.
A Record Trade Surplus Reflects Export Strength and Structural Imbalances
The scale of China’s 2025 trade surplus reflects a clear pattern that has been building for years. Exports continued to outperform expectations, while imports remained comparatively subdued.
December figures showed exports rising 6.6% year on year, beating forecasts and accelerating from the previous month. Imports also surprised on the upside, increasing 5.7%, their strongest growth since early autumn, yet still not enough to narrow the overall balance.
Over the full year, exports rose 5.5% while imports were largely flat, resulting in a surplus around 20% larger than in 2024. This divergence highlights how much China still relies on external demand to support growth. Domestic consumption, which policymakers have long identified as a strategic priority, remained weak throughout the year.
Consumer prices were flat, missing the government’s inflation target, while confidence was weighed down by job market uncertainty and ongoing stress in the real estate sector.
Trade data also revealed shifting global relationships. Trade with the United States continued to contract sharply.
Exports to the US fell 30% in December and were down 20% for the year as a whole, while imports from the US also declined. This trend persisted despite limited diplomatic progress and a temporary easing of some trade restrictions.
By contrast, trade with other regions strengthened. Exports to the European Union and ASEAN countries grew at double-digit rates in December, while imports from Europe rose notably.
These shifts suggest that China is gradually diversifying its trade partners, even as geopolitical tensions reshape global supply chains.
International concern about the size of China’s surplus has intensified. The International Monetary Fund has repeatedly warned that such large imbalances risk distorting global trade and increasing political friction.
Its leadership has urged Beijing to accelerate efforts to boost household spending and reduce reliance on exports. While Chinese officials have acknowledged the issue and pledged to expand imports, progress remains slow, constrained by structural headwinds at home.
Central Bank Liquidity Support and Its Potential Market Impact
Against this backdrop, attention has turned to policy support, particularly from the People’s Bank of China.
Shortly after the trade data confirmed the record surplus, the central bank injected 86.1 billion yuan, around $12.3 billion, into the financial system through seven-day reverse repurchase operations.
Although modest in size, the move carries important signals. It indicates that policymakers remain focused on maintaining stable financial conditions as economic uncertainty persists.
Reverse repos are a targeted tool, allowing the central bank to ease short-term funding pressures without committing to broad-based monetary easing. This approach reflects Beijing’s caution about fuelling excessive leverage or reigniting speculative behaviour.
For markets, liquidity injections can help smooth volatility and support confidence, particularly in money markets and the banking system. Easier short-term funding conditions reduce stress for financial institutions and can support lending to businesses and local governments.
This is especially relevant as fiscal pressures remain elevated and many firms continue to face tight margins.
There are also wider implications. Stable liquidity supports commodity demand expectations, including for industrial inputs such as iron ore, which reached record import volumes in 2025 even as port stockpiles increased.
For equity and currency markets, the signal is more balanced. Liquidity support can underpin sentiment, but it does not resolve deeper structural challenges such as weak consumption or the property sector slowdown.
Investors are increasingly aware that policy support is acting as a buffer rather than a catalyst. While further injections are possible if conditions tighten, a sustained recovery in domestic demand will require broader reforms.
In the meantime, China’s trade surplus and cautious monetary support will remain central to how global markets assess the country’s economic trajectory in 2026.
Conclusion
China’s $1.2 trillion trade surplus underscores the country’s extraordinary export capacity at a time when domestic growth remains uneven. Strong external demand has provided resilience, but it has also intensified global concerns about trade imbalances and long-term sustainability.
The central bank’s liquidity injection signals a commitment to stability rather than aggressive stimulus, reflecting the delicate balance policymakers face.
As China moves deeper into 2026, the challenge will be to convert trade strength into healthier domestic momentum without exacerbating external tensions. How effectively this balance is managed will shape not only China’s outlook, but the wider global economy as well.