China's trade surplus exceeded US$1 trillion in the first 10 months

The Chinese government announced on Tuesday that China's trade surplus surged past $1 trillion in the first 10 months of this year, surpassing last year's record pace, as exports continued to rise sharply.

China has seen strong global demand for green energy products, from solar panels to electric cars, as Iran's attacks on ships in the Strait of Hormuz pushed up international oil prices. China has also profited from the AI ​​data center boom, manufacturing most of all but the most powerful semiconductors.

The General Administration of Customs stated that China's trade surplus reached US$1.04 trillion in the first 10 months of this year, of which exports exceeded imports by US$105.3 billion in October, driving a substantial increase in the trade surplus. As oil prices remain high, October's data narrowed compared with September. In addition, in order to ensure its own supply, China has restricted the export of diesel, aviation kerosene and other refined oil products to neighboring countries.

Exports surged 35.2% year-on-year last month, led by strong shipments of cables, racks and other equipment used in data centers in other countries. Imports jumped 41.6%, including a large number of electronic products used in the construction of China's own artificial intelligence infrastructure.

The data came a day after Washington and Beijing took steps to ease tariffs and limit the use of export controls by Jan. 10, giving effect to an agreement reached by senior officials from both countries ahead of a September summit in Washington between President Trump and China's top leader Xi Jinping.

China's growing trade surplus partly reflects the significant competitiveness of its exports. Low labor costs and heavy investment in the latest automation technology keep production costs low. World-class infrastructure makes it cost-effective to ship goods from across China to international markets. China's weak currency also helps Chinese goods maintain price advantages in far-flung markets.

China also helps exporters with tax rebates, which currently consume nearly one-eighth of the government's tax revenue.

However, the trade surplus is also a manifestation of China's domestic economic weakness. The country's housing market is slowly collapsing, with house prices nationwide falling by about 40% in the past five years, destroying the life savings of many in the middle class.

Distrustful of stocks, bonds and mutual funds, Chinese households once invested about four-fifths of their savings in apartments, only to discover that real estate was not as safe an investment as widely thought. This has prompted many Chinese households to save money by cutting back on purchases of everything from cars to home appliances.

At the same time, China’s national self-reliance drive has further reduced its need for imports. “As supply chains continue to be established in China, demand for foreign parts is decreasing,” said Deborah Elms, head of trade policy at the Hallish Foundation, a Singapore-based group that supports free trade.