China trade surplus exceeds US$1 trillion in 2025 per East Asia Forum

China’s trade surplus exceeded US$1 trillion in 2025, pushing global economic imbalances back to the center of international policy debates. According to East Asia Forum, international policy responses risk relying on an incomplete understanding of what drives this surplus, often mistakenly attributing it to sector-specific industrial policy, exchange-rate management, or property market weakness.

Structural Savings Surpass Industrial Strategy

Chang Ma argues that while technological upgrading and industrial policies have expanded advanced manufacturing capacity, these forces only explain the sectoral and geographic composition of the trade surplus. They do not explain why national saving persistently exceeds domestic investment. Instead, structural factors best account for high savings and investment levels. The first structural driver is demographic, as China’s skewed sex ratio produces families in which sons save more to compete in the marriage market. Ma and co-author Shang-Jin Wei estimate this dynamic alone accounts for more than half of the increase in China’s household saving rate between 1990 and 2007, as reported by East Asia Forum.

Banking Biases and Land Revenue Drops Strain Local Governments

The second structural factor involves uneven financial access. China’s banking system has historically favored state-owned enterprises, forcing private firms to finance expansion through retained earnings, which raises corporate savings. Meanwhile, Tianlei Huang explains in East Asia Forum that the property market downturn has broken the land finance model that funded local government spending for decades. Land-related revenues fell from 10 percent of GDP in 2021 to less than 5 percent in 2025, leaving heavily indebted local governments with estimated local arrears of 10 trillion RMB, or about 7 percent of Chinese GDP.

Customs Statistics Reveal Wider Imbalances

In a related evaluation of external accounts, researchers at the Federal Reserve documented historical revisions to China’s balance of payments data released in the fourth quarter of 2025. Harun Alp, Sina Ates, Colin Caines, Nathan Converse, Jasper Hoek, and Eva Van Leemput reported that these revisions substantially altered the discrepancy between customs and balance of payments trade data, concentrating the remaining gap almost entirely on the import side. Federal Reserve notes state that replacing balance of payments goods trade data with customs statistics makes China’s current account surplus roughly 0.6 percent of GDP larger than official statistics report.

Federal Reserve Estimates Show Undervalued Renminbi as Firms Go Global

Applying the International Monetary Fund’s External Balance Assessment framework to this adjusted current account estimate indicates that the renminbi is undervalued by approximately 24 percent relative to its medium-term fundamentals, compared with 20 percent using official data, according to the Federal Reserve. Concurrently, East Asia Forum notes that constrained by sluggish domestic consumption and intense home-market competition known as neijuan, Chinese companies are increasingly pushing to go global, creating both benefits for foreign consumers and competitive pressures for overseas industries.