China's Record Trade Surplus and Its Implications for Global Trade Dynamics

China's merchandise trade surplus reached an unprecedented $1.08 trillion during the first 11 months of 2025, marking a 22.1% increase compared to the same period in the previous year. November alone contributed $111.7 billion to this surplus, driven by strong export performance in manufacturing, technology, and industrial sectors. This surge has prompted discussions regarding the implications for the renminbi's valuation and the potential for increased protectionist measures from other countries.

China Trade Surplus Hits $1.08 TrillionSouth China Morning PostExpress Tribune

According to the Rhodium Group, while China's export performance is crucial for its economic growth in 2026, external factors such as trade measures from other nations and a slowdown in demand from developed economies pose significant risks. Daniel Rosen, co-founder of Rhodium, noted that Europe and emerging markets may intensify their pushback against Chinese trade practices, potentially complicating China's efforts to maintain its economic growth target.

South China Morning PostChina Trade Surplus Hits $1.08 TrillionExpress Tribune

The substantial trade surplus has reignited debates over whether the renminbi (RMB) is undervalued. Economists argue that a stronger RMB could enhance imports and alleviate competitive pressures on global markets, particularly in Europe and the United States. However, the relationship between the RMB and trade fundamentals is complex. Traditional neoclassical models suggest that persistent trade surpluses should lead to currency appreciation, yet real-world evidence often contradicts these predictions.

Express TribuneChina Trade Surplus Hits $1.08 Trillion

Recent analyses highlight the growing influence of financial markets on currency valuation. (Post-)Keynesian economists contend that capital flows and investor sentiment significantly shape exchange rates, often overshadowing trade fundamentals. The RMB's recent depreciation, despite improvements in manufacturing and productivity, exemplifies this dynamic. Between January 2022 and October 2025, the RMB's real effective exchange rate declined by approximately 16%, a trend attributed to a slowdown in credit growth and domestic demand.

Express TribuneChina Trade Surplus Hits $1.08 Trillion

Critics of the traditional exchange-rate models argue that they fail to account for the complexities of modern financial systems. They emphasize that exchange rates are increasingly driven by short-term capital movements and investor expectations rather than long-term economic fundamentals. This perspective suggests that claims of significant RMB undervaluation may be overstated, as the currency's movements reflect broader financial cycles rather than mere trade imbalances.

Express TribuneChina Trade Surplus Hits $1.08 Trillion

Policymakers in China are focused on maintaining stable economic growth while gradually adapting currency policies to align with international expectations. Analysts emphasize the need for a nuanced understanding of exchange-rate dynamics, advocating for frameworks that incorporate both real-economy fundamentals and financial forces.

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As China navigates its record trade surplus and the associated challenges, the global economic landscape may witness increased protectionist measures from trading partners. The ongoing discussions regarding the RMB's valuation and its implications for trade relations will likely shape China's economic strategies in the coming years.

China Trade Surplus Hits $1.08 Trillion

• “These lower prices have allowed China to diversify its exports away from the United States,” — Daniel Rosen, Co-founder, Rhodium Group

South China Morning Post

• “In such an environment, exchange rates are shaped primarily by financial transactions, capital flows and expectations rather than by trade fundamentals alone.” — Source Unspecified

Express Tribune