China's trade surplus reached US$1.04 trillion in the first ten months of 2026, marking a second consecutive year above the $1 trillion threshold. This milestone highlights how export dynamics and domestic weakness are reshaping the economy.

Exports surged 35.2% in October 2026 compared with the same month a year earlier, according to customs data. The sharp increase was largely driven by a global push to expand AI infrastructure, which boosted demand for Chinese technology products.

At the same time, imports jumped 41.6% in October, outpacing the median forecast of a 32% rise. The rapid growth reflects strong overseas demand for inputs that Chinese factories supply, reinforcing the trade imbalance.

Domestic consumption remains weak because a prolonged property market slump has eroded household wealth and confidence. With fewer people willing to spend, Chinese firms have turned increasingly to overseas markets to sustain growth.

The swelling surplus could fuel further tensions with the European Union, where leaders have called for more trade curbs on China. Joe Peissel, lead macroeconomist at Trivium China, warned that the risk of additional tariffs and other trade barriers will stay elevated in 2027. The global AI investment boom is expected to keep demand for Chinese technology products strong into 2027, but it also raises the possibility of deeper trade frictions, especially with the EU.