China’s trade surplus crossed the $1 trillion mark in the first 10 months of 2026, marking the second consecutive year the country has reached the milestone. Strong overseas demand for semiconductors, electronics and other technology products linked to the global artificial intelligence (AI) investment boom has helped sustain exports despite weak consumer spending at home.

The surplus reached $1.04 trillion between January and October, according to customs data released on Tuesday. China achieved the milestone a month earlier than it did in 2025, highlighting the strength of its export sector and the growing importance of international markets to its economy.

Exports rose 35.2% year-on-year in October in US dollar terms, slightly below September’s 36.3% growth but ahead of the 33.5% increase forecast by economists in a Reuters poll.

Imports also recorded a stronger-than-expected performance, climbing 41.6% compared with a 31% increase in September. The growth exceeded economists’ forecast of 32%.

However, faster import growth helped narrow China’s monthly trade surplus to $105.3 billion in October, down from $133.5 billion in September.

AI investment boom strengthens Chinese exports

The global expansion of AI infrastructure has become an important driver of China’s export performance. Rising investment in data centres, computing infrastructure and related technology has supported international demand for Chinese-made electronics and semiconductor products.

The trend has helped manufacturers maintain overseas sales even as domestic consumption remains under pressure. Analysts expect demand for Chinese technology exports to remain relatively strong into 2027, although its sustainability will depend partly on the continuation of global AI investment.

Macquarie analysts said exports could accelerate further in the fourth quarter before starting to lose momentum in the first quarter of 2027.

Dave Chia, an economist at Moody’s Analytics, also expects exports to remain strong through the rest of the year, supported by electronics and automobile shipments.

However, the growing dependence on technology-related exports creates risks if the AI investment cycle slows. A correction in the sector could reduce demand for chips and electronics, putting pressure on China’s overseas shipments.

Growing surplus puts trade relations under pressure

China’s expanding trade surplus is also attracting greater scrutiny from its trading partners, particularly the European Union.

European leaders have called for additional trade restrictions on Chinese goods after reaching an agreement with Beijing to limit Chinese hybrid vehicle exports to the bloc over the coming years.

Since the restrictions have not yet taken effect, manufacturers are expected to accelerate shipments in the near term, potentially supporting export figures.

Joe Peissel, lead macroeconomist at Trivium China, said the risk of additional tariffs and other trade barriers would remain elevated in 2027 as Chinese manufacturers continued expanding their overseas presence.

Relations with the United States also remain an important factor for China’s trade outlook. Beijing officially announced a two-month extension of its trade truce with Washington on Monday, extending an arrangement that was due to expire on November 10.

China has also indicated that any increase in purchases of US agricultural products would depend on the implementation of the agreed reciprocal tariff-reduction arrangement.

China’s trade surplus with the US narrowed slightly to $32.71 billion in October from $34.01 billion in September. Despite the decline, the imbalance remains a major point of friction between the two economies.

Trade is expected to feature prominently in the planned meeting between US President Donald Trump and Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Shenzhen later this month. The two leaders are expected to meet for the third time this year.

Weak domestic consumption pushes manufacturers towards overseas markets

China’s strong export figures contrast with continued weakness in its domestic economy. Consumer spending remains subdued, while the prolonged property market downturn has affected household wealth and confidence.

With demand at home under pressure, manufacturers are increasingly looking towards international customers to maintain sales.

The automobile industry illustrates this trend. Chinese vehicle exports maintained solid growth in October, while domestic vehicle sales recorded their 12th consecutive monthly decline, according to separate industry data.

Analysts cited by the Associated Press have pointed to industrial overcapacity, excess domestic savings and weak consumption as factors encouraging companies to expand overseas sales.

The pressure is also visible in competition among domestic businesses. Cinders Zhou, who sells eyewear for a manufacturer in the eastern Chinese city of Linhai, told the Associated Press that increasingly similar products had intensified price competition across the industry.

This environment has added to concerns about the sustainability of China’s export-led growth. Greater reliance on overseas demand leaves manufacturers vulnerable to weaker global consumption and additional trade restrictions.

A slowdown in the AI sector could create another challenge by reducing demand and prices for chips and electronics.

Oil imports decline despite efforts to secure supplies

China’s oil imports fell 13.3% in October compared with the same month last year. However, monthly shipments reached their highest level since March as buyers sought supplies following disruptions to Middle Eastern oil flows linked to the US-Israeli war on Iran.

The latest trade figures arrive as Beijing prepares for discussions with Washington at the APEC summit. The two countries had previously proposed a $60 billion package of reciprocal tariff reductions following their September summit in Washington. The proposed arrangement included approximately $17 billion worth of US agricultural goods.

Chinese officials have maintained that Beijing does not seek to expand its trade surplus and supports more balanced global trade.

Nevertheless, the $1.04 trillion surplus highlights how heavily China’s economic performance currently relies on overseas demand. While the AI investment boom and strong technology exports have provided significant support, slowing domestic consumption and the possibility of further trade restrictions remain important challenges.

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