China's trade surplus soars past $1tn as AI boom powers exports

China's trade surplus skyrocketed past $1tn within the initial 10 months, propelled by the worldwide push for AI infrastructure development and the surge in high-tech product sales. This trend is likely to intensify tensions with significant trading partners. The data precedes a meeting at the Asia-Pacific Economic Cooperation summit in Shenzhen, where Chinese President Xi Jinping and US President Donald Trump are set to discuss broader economic relationships and tariff policies.

The figures underscore China's increasing reliance on overseas demand to bolster an economy plagued by weak domestic consumption and a prolonged property crisis. While the global AI investment boom is anticipated to sustain demand for Chinese technology products through 2027, analysts caution that deeper dependence on external markets could render China more susceptible to protectionist measures from abroad, while obscuring domestic issues.

October exports increased by 35.2% in US dollar terms compared to October 2025, slightly less than the 36.3% surge in September, and surpassing economists' prediction of a 33.5% growth. This surge contributed to a trade surplus of $1.04tn for the first 10 months, surpassing the $1tn mark for the second consecutive year, a month ahead of 2025's record.

This burgeoning surplus may exacerbate tensions with the European Union, which has urged more trade restrictions with China following an agreement to limit Chinese exports of hybrid vehicles to the bloc over the next few years. Since these measures have not yet entered effect, factories are projected to accelerate shipments, further boosting exports in the near term.

The potential for additional tariffs and trade barriers will remain a concern in 2027, especially as Chinese manufacturers expand their global presence. October's trade surplus with the US contracted slightly to $32.71bn from $34.01bn the previous month, yet the overall imbalance remains a point of contention between the world's two largest economies.

China and the US recently extended a trade truce for two more months, with Beijing stating that any increase in purchases of US farm goods would depend on reciprocal tariff reductions. Imports surged 41.6% in October from a year prior, exceeding the 32% growth forecast in the Reuters poll and accelerating from the 31% increase in September.

Customs data also indicated a minor rise in rare-earth exports from the previous month, while crude oil imports hit their highest level since March due to supply disruptions in the Middle East. Rare-earth export volumes have softened, hinting that China may be easing some export controls, possibly due to ongoing pressure from the US to improve rare-earth supplies.

A major concern for Beijing is that consumer spending remains subdued, owing to a slowdown in the property market that has eroded household wealth and undermined confidence in the economic outlook. Weak domestic demand has pushed Chinese automakers to focus on overseas markets. October saw robust growth in China's car exports, while domestic vehicle sales recorded their 12th consecutive month of decline, according to data from an industry association.

While this increased reliance on exports leaves China's economy vulnerable to any global demand slowdown, some analysts anticipate shipment growth to decelerate once the AI investment cycle matures. At present, most industry observers expect AI-related demand to stay robust. China's semiconductor exports rose 111.1% year-on-year in the first 10 months in US dollar value terms, and overall shipments of high-tech products grew 47.9%.

While a base effect may temper trade growth next year, AI-related trade is projected to remain strong in the coming months, even as recent equity market volatility looms.