Chinas huge trade surplus brings limited boost to forex reserves

China’s trade surplus surged to a record in 2025, even as United States President Donald Trump launched a new round of tariff wars against the country last April.

China’s totalexports rose 5.5% year-on-year to US$3.77 trillion in 2025, while imports were flat at US$2.58 trillion,according to the General Administration of Customs. The trade surplus surged toUS$1.19 trillion in 2025, up from US$992 billion in 2024.

However, data released by the People’s Bank of China on January 7 showed that the country’s forex reserves increased by only US$160 billion toUS$3.36 trillion at the end of December 2025 from a year earlier. It means only 13% of the reported huge trade surplus flowed into China in 2025.

The forex reserves figure has largely stayed between US$3.01 trillion and US$3.33 trillion over the past decade.

“There are several reasons why only a small portion of China’s trade surplus translated into higher foreign exchange reserves,” says aBeijing-based financial columnist writing under the pen name Dao Ge.“For example, the US$992 billion trade surplus in 2024 was not earned entirely in US dollars.A majority of it was settled in yuan and other currencies, meaning the actual increase in dollar holdings may have been about US$200 billion.”

Dao adds that outbound spending by Chinese tourists and students, profit remittances by foreign companies in China, and overseas investment by Chinese state-owned enterprises (SOEs) have all put pressure on the reserve balance.

It is no secret that Chinese SOEs have, for years, used renminbi to purchase crude oil from heavily sanctioned countries such as Venezuela, Iran and Russia, as well as minerals from some African nations. Those countries can use the currency to buy Chinese goods or get global currencies in Hong Kong.

A Henan-based writer says that, amid the recent political turmoil in Venezuela and rising social unrest in Iran, Beijing will have to fine-tune its renminbi internationalisation plan.

The pressure could intensify after Trump said on Monday that countries doing business with Iran would face a new 25% tariff, a move that could make Chinese goods significantly more expensive in the US, given China’s strong trade ties with Iran.

Fabricated export records

In fact, the record-high trade surplus runs counter to widespread impressions that many manufacturers are leaving China for Southeast Asia, including Vietnam, Thailand and Indonesia, leaving large numbers of factory workers unemployed.

Some overseas commentators said China’s export data might have been inflated. They alleged that some companies bought invoices to create fictitious export records fortax rebate claims.

In one case, a company in Liaoning fabricated export transactions to illegally obtain tax rebates worth 212 million yuan (US$30 million).Another case was disclosed in July 2024, when police in Wuhan said they had dismantled an export tax rebate fraud ring involving a small supply-chain firm that fabricated export records linked to more than 200 million yuan in offshore cargo value and claimed about 27 million yuan in rebates using fake invoices.

A commentary published by Shanghai Metals Market, a Shanghai-based news outlet specializing in nonferrous metals trading, said that fake invoice-based exports accounted for about 30% of China’s steel exportsin 2023 and 2024.

It remains unclear how these cases have distorted China’s trade statistics, as the government has not released a comprehensive national estimate that covers all such illegal activities. In March last year, the central government unveiled a new set of rules to crack down on these practices, effective on October 1, 2025.

Pessimistic outlook

Wang Jun, vice head of the General Administration of Customs, said in a media briefing on Wednesday thatChina’s trade performance last year was supported by a combination of policy support, domestic demand and industrial strength.

He said key drivers behind last year’s strong trade growth include:

Policy support: Central and local governments rolled out targeted measures to help exporters secure orders and expand markets. Customs authorities piloted 29 trade‑facilitation policies, now being expanded nationwide, helping cushion external shocks.

Domestic market demand: China’s large consumer base underpinned import demand as the economy recovered. In the first three quarters, China was the main export destination for 79 countries and regions, with full‑year imports reaching 18.48 trillion yuan, about 10% of the global total.

Industrial strength: China’s complete industrial system and integrated supply chains sustained export growth. Manufacturing exports have expanded for nine consecutive years, led by equipment manufacturing, which accounted for nearly 60% of total exports.

“Global trade momentum is weakening as economic growth slows, geopolitical tensions persist, policy uncertainty remains high and trade costs continue to rise,” he said. “International organizations have downgraded their forecasts for global trade, and global goods trade growth is expected to stay weak in 2026.”

Wang said China would nevertheless be able to navigate the external headwinds, citing the country’s institutional strengths, large domestic market, complete industrial system and deep talent pool.

He added that exports of high‑tech products rose 13.2% year-on-year, contributing 2.4 percentage points to overall export growth. He said exports of industrial robots exceeded imports for the year, making China a net exporter of these products for the first time.

At the Consumer Electronics Show (CES) 2026 in Las Vegas from January 4 to 9, humanoid robots emerged as one of the most eye‑catching categories, with Chinese companies dominating the field. Official CES figures showed that 21 of the 38 exhibitors showcasing humanoid robots were from China, giving the country more than half of the global presence in the segment and highlighting the rapid commercialization of its robotics innovation.

Read: US isn’t winning trade war despite drop in its imports from China

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