Exports to US, EU push China towards record trade surplus

China's exports surged by 36.3% year-on-year in September, significantly surpassing the 25.7% growth forecast predicted by a Bloomberg survey of market analysts. This surge in exports has positioned China to potentially achieve a record annual trade surplus, which is expected to fuel calls from major trading partners, including the European Union (EU) and the United States, for a re-evaluation of trade policies.

While imports also increased by 31% in September, China's trade surplus for the month remained robust at $133.5 billion, marking the highest monthly surplus since January 2025. The country's overall trade surplus, up to the end of September, reached an impressive $938.1 billion, pushing it closer to breaking the record $1.2 trillion surplus recorded last year.

Despite strong export growth, domestic demand in China has remained subdued, with retail sales expanding only by 0.4% year-on-year in August. This has led Beijing to heavily rely on exports to achieve its annual growth target of 4.5% to 5%. However, the surge in exports has sparked concerns from key trading partners. The United States, which recently concluded a contentious trade war with China, saw a 39.6% increase in shipments from China in September.

Similarly, the EU, facing a daily deficit in the trade balance with China exceeding €1 billion, has expressed dissatisfaction with the current imbalance and pledged to rebalance their trading relationship. EU officials have proposed limiting exports of Chinese hybrid vehicles to Europe, although analysts believe this adjustment will have a limited impact on China's economy compared to the overall trade imbalance.