China's 2025 trade surplus hits US$1.2 trillion, with private investments reshaping financial flows and reducing reliance on official reserves.
China ended 2025 with a record US$1.2 trillion merchandise-trade surplus, but the funds are increasingly being recycled through private portfolio investment rather than official reserves, reports the Japan Times.
Customs data showed a US$1.2 trillion surplus, though balance-of-payments figures put it closer to $1.1 trillion. After accounting for services and income deficits, the current-account surplus stood at $735 billion.
In the early 2000s, the People's Bank of China absorbed foreign exchange and channeled it into reserves, boosting US Treasury holdings. However, since 2012, companies have retained earnings, loosening the link between surpluses and reserve accumulation.
By 2015, expectations of yuan depreciation prompted firms to hold dollar deposits and repay foreign liabilities. More recently, with the yuan stable, investors have sought yield through bonds and equities, particularly via Stock Connect into Hong Kong.
Net portfolio outflows reached $426 billion in 2025, with mainland investors adding $208 billion to overseas equities and $153 billion to foreign debt. Southbound flows into Hong Kong equities surged 74 percent to HK$1.4 trillion.
Direct investment abroad also rose, with Chinese firms expanding overseas. Overall, China's non-reserve financial account recorded an $820 billion deficit, mirroring the current-account surplus.
Analysts say Hong Kong is well placed to absorb these flows, advancing Beijing's goal of developing offshore yuan markets. The shift underscores how private actors, not the central bank, now drive the recycling of China's surpluses, making flows more sensitive to market conditions.
