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

China's trade surplus has surpassed US$1 trillion for the first time in 10 months, driven by a surge in exports fueled by the global AI boom. According to customs data, exports rose 35.2% in October compared to the same period last year, lifting the trade surplus to US$1.04 trillion in the first 10 months. This marks the second consecutive year China has exceeded the US$1 trillion mark in trade surplus and occurs a month earlier than in 2025.

The AI infrastructure race has been a major factor in the export growth, as China caters to increasing global demand for technology products. However, while the demand is expected to remain strong until 2027, it may deepen domestic imbalances and create trade tensions, particularly with the European Union, which has called for more trade curbs with China following an agreement to limit Chinese exports of hybrid vehicles.

China recently extended its trade truce with the United States by two months, but the prospect of new tariffs and trade barriers remains a concern. Sluggish domestic demand, exacerbated by a weakened property market, has forced Chinese automakers to focus on overseas sales. Despite this, Chinese car exports showed a solid growth in October, while domestic vehicle sales continued a streak of 12 consecutive monthly declines.

The AI boom is expected to further boost exports in the fourth quarter of 2026, but growth may slow from 2027 onwards, depending on the duration of the AI infrastructure expansion. Macquarie analysts have warned that China's economy is becoming increasingly vulnerable to global demand fluctuations due to its heavy reliance on exports.