(Deutsche Welle Chinese website) Data released by China's General Administration of Customs on Wednesday (October 14) showed that China's exports rose sharply in September, pushing the trade surplus for the whole year to a record high, which may intensify trade frictions between China, the European Union and the United States.
According to official data, China's exports increased by 36.3% year-on-year in U.S. dollars in September, further accelerating from the 25% growth rate in August and setting the fastest growth rate since February this year. Imports increased by 31% year-on-year, which was also higher than the 28.2% increase in August. As both import and export growth exceeded the 25.7% and 25% expected by Bloomberg and the 25.5% expected by Reuters, China recorded a trade surplus of US$133.5 billion in a single month in September, the highest level since January 2025.
As of the end of September, China's cumulative trade surplus in the first three quarters of this year reached US$938.1 billion. Agence France-Presse and Reuters reported that this figure puts China, the world's second largest economy, on track to break the annual record of nearly US$1.2 trillion set last year, and that the time point for crossing the US$1 trillion mark is significantly earlier than last year.
High-tech exports contrast with weak domestic demand
Reports from Agence France-Presse and the German Press Agency pointed out that one of the main driving forces behind the higher-than-expected growth of imports and exports in September was the strong global and domestic demand for artificial intelligence (AI)-related products (such as semiconductors and computing equipment), as well as the increase in the prices of related products. Customs data shows that exports of integrated circuits only increased slightly by 1% in quantity in September, but soared by 136% in dollar terms; from January to September this year, the export value of semiconductors increased by 108.1% year-on-year, and the export of automatic data processing equipment and its parts also increased by 54.6%. At the same time, global demand for China's electric vehicles and hybrid vehicles remains high. Automobile exports in September increased by 56.3% year-on-year, and automobile exports in the first nine months increased by 54.3%.
However, behind the strong exports, China's domestic consumption and investment are still weak due to the years of sluggish real estate market. Agence France-Presse mentioned that China’s total retail sales of consumer goods in August only increased slightly by 0.4% year-on-year. Faced with sluggish domestic demand, Beijing relies heavily on exports to support its annual economic growth target of 4.5% to 5%. On Tuesday, the International Monetary Fund (IMF) lowered China's economic growth forecast to 4.5% in 2026 and expected it to slow further to 4.0% in 2027. The IMF warned that strong exports cannot fully offset weak domestic demand.
Lynn Song, chief economist for Greater China at ING, told Reuters: "Major trade relations are expected to remain stable by the end of the year, which will keep the most important growth engine running this year." However, analysts generally believe that although Chinese officials have recently introduced stimulus measures such as mortgage interest subsidies, expanding domestic demand has not yet become a main priority this year.
Huge imbalance between China and Europe triggers car quota restrictions
China's outstanding performance in foreign trade has exacerbated its imbalance with major Western economies. Data quoted by Deutsche Presse-Agentur and Agence France-Presse show that China’s exports to the EU increased by 25.3% in September, while imports from the EU basically stagnated, with only a slight increase of 0.7% (exports to Germany increased by 31.4%, while imports from Germany increased by only 0.1%); China’s single-month surplus with the EU reached US$34.8 billion. In addition, due to the low base caused by mutual tariffs in the same period last year, China's exports to the United States increased by 39.6% year-on-year in September, and the surplus with the United States exceeded US$34 billion, setting a new high in 20 months.
Given that the EU's bilateral trade deficit with China has exceeded 1 billion euros every day, EU trade chief Maros Sefcovic held talks with Chinese Commerce Minister Wang Wentao in Beijing last week. According to reports from Reuters and Agence France-Presse, the two sides reached a four-year agreement that sets an annual quota limit of 350,000 units of hybrid vehicles from China to the EU and allows annual increases of 6%. The first batch of specific restrictions is expected to be implemented in early December. Sefcovic called this the "first step" in reversing the trade imbalance between China and Europe, and accused China of squeezing out European companies through subsidies and unfair trade practices. China's Commerce Ministry said on Monday that the new deal, reached after "intensive consultations" between the two sides, would keep exports growing and ensure quotas commensurate with other countries.
Xinhua News Agency reported on Wednesday that Chinese Vice Premier He Lifeng met with French President Macron's chief diplomatic adviser Emmanuel Bonne in Beijing on Tuesday and said that bilateral relations have great potential and China is willing to work with the European side to inject more stability and positive energy into economic and trade relations.
The external demand growth model faces multiple long-term obstacles
Washington's investigation into China's overcapacity this year continues despite Chinese President Xi Jinping meeting U.S. President Donald Trump in Washington last month, where the two sides pledged to extend a trade truce and explore tariff cuts on $30 billion of their respective goods.
Eswar Prasad, a professor of trade policy at Cornell University, told the Associated Press that many of China's trading partners are facing sluggish economic growth and are very worried about the impact of their manufacturing industries on exports from China. At the same time, some policymakers believe that a weaker yuan exchange rate makes Chinese exports cheaper, but Beijing reiterated that it has "no need or intention" to gain a competitive advantage through currency depreciation, emphasizing that export growth stems from the global competitiveness of its industries.
Tightening regulations and demand variables in external markets are accumulating. Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management, warned in an interview with the Associated Press that China's high-tech export model relies heavily on open markets. Although dispersing shipment destinations to Southeast Asia or Latin America is helpful, it cannot completely replace the demand in Western markets. Nguyen Hoang Nam, China economist at Capital Economics, also pointed out in a report to AFP that China's trade surplus with the EU and the UK has hit a new high, and Brussels is considering extending restrictions to more strategic industries.
In addition, changes in industry cycles also pose potential risks. Some U.S. technology industry leaders have previously called for slowing down the pace of artificial intelligence research and development globally due to security concerns. Max Zenglein, Asia-Pacific economist at The Conference Board, analyzed this: "The slowdown in the global artificial intelligence investment cycle may pose a greater threat to China's export growth than trade restrictions imposed by other countries."
