China Trade Surplus High: A-shares Investment Insights & Macro Risks

From January to November 2024, China’s goods trade surplus reached a record high of $1.07 trillion, with exports rebounding 5.4% year-on-year, indicating that external demand remains an important driver of economic growth. [1] However, at the same time, domestic deflationary pressure is obvious: in 2024, CPI rose by only 0.7% year-on-year, while PPI remained in the negative range of -2.2%. Aggregate demand is weak, with insufficient momentum in consumption and investment; and a sharp increase in social insurance expenditures has further squeezed fiscal space. [2] This structural divergence of “strong external demand but weak domestic demand” means that the profits generated by the trade surplus have not been effectively transmitted to domestic residents or capital formation.

• Export Profits Are Decoupled from Residents’ Income
  
  During the expansion of trade surplus, many enterprises return part of their earnings to overseas customers through export tax rebates and subsidy mechanisms or directly lower prices, resulting in limited domestic profit retention; meanwhile, enterprises with high export contributions mostly use profits for re-exports, overseas mergers and acquisitions, or overseas financing, limiting their ability to drive domestic investment.

• Capital Structure Is Concentrated Overseas
  
  Foreign exchange from the surplus, under the central bank’s regulation, is mostly used for foreign exchange reserves, treasury bond investments, or overseas industrial chain restructuring, rather than being converted into new infrastructure, manufacturing upgrades, or residents’ purchasing power; slow recovery of residents’ income leads to low consumption willingness, making it difficult for enterprises with good exports to obtain superimposed effects from downstream domestic demand.

• Visual Aid
  
  The attached figure comprehensively shows the divergent trends of continuously expanding trade surplus, sluggish CPI/PPI, capital flow leaning toward “retained overseas + tax rebates and subsidies”, and export sectors outperforming domestic demand sectors [0], strengthening the intuitive impression of “coexistence of surplus growth and weak domestic demand”.

1. Export-Oriented Enterprises Remain Resilient in the Short Term, but Quality Needs to Be Screened
   • Leaders with global pricing power, perfect overseas production layout, and strong supply chain control (such as new energy vehicles, optical modules, chemical raw materials) can still continue to profit from external demand. Especially enterprises that have bypassed trade barriers through localized production are expected to benefit under the background of stable currency value and global infrastructure investment expansion.
   • However, when export profits are mainly used for overseas expansion, foreign mergers and acquisitions, or inventory expansion, the secondary growth of returning to domestic markets is not reflected in A-share valuations; it is necessary to pay attention to whether these enterprises use earnings for technological upgrading, automation transformation, or domestic capacity optimization to enhance the “sustainability” in the onshore capital market.

2. Structural Risks Need to Be Alerted in the Transmission of Surplus to Domestic Demand
   • In a deflationary environment, if enterprises rely only on export profits and ignore domestic market development, their performance is easily affected by global demand fluctuations. It is recommended to increase preference for enterprises driven by both “export + domestic sales”, especially those with brand, channel, and service capabilities in home appliances, consumer electronics, and other fields.
   • The tug-of-war between returns of the “export” sector and “domestic demand” sector means intensified market differentiation. Investors should screen enterprises with both overseas share growth and onshore investment/consumption scenario expansion through fundamental analysis to avoid retracement risks from single external demand dependence.

3. Linked Opportunities Between Policy and Valuation Repair
   • If the government continues to introduce targeted consumption stimulus (such as home appliance and car replacement programs), accelerate infrastructure investment, and optimize export tax rebate mechanisms to more efficiently convert external profits from trade surplus into domestic chains, the profit improvement of export enterprises is expected to be amplified through the “multiplier effect” of investment/consumption channels.
   • Currently, the valuations of most export-weighted sectors in A-shares are below their long-term averages; if policies promote domestic demand release, a “profit + valuation” double repair can be formed. It is recommended to pay phased attention to high-quality export leaders with policy sensitivity and definite profit improvement.

• Short-term Strategy
  : The external demand track centered on export leaders can still provide defensive returns, but it is necessary to strengthen monitoring of profit usage, domestic investment conversion degree, and RMB exchange rate sensitivity.
• Mid-term Layout
  : Focus on allocating “internal-external balanced” enterprises with strong export capabilities and continuous profit investment in domestic industrial upgrading and consumption scenarios, especially in sectors with structural growth such as new energy, intelligent manufacturing, and high-end home appliances.
• Risk Reminder
  : If global demand slows down, exchange rates fluctuate, or export tax rebate policies are adjusted, export enterprises’ profits may be hit quickly; if deflationary pressure does not ease and domestic demand does not start, the overall sentiment of the capital market may be delayed in repair.

If you want to further analyze the financial transmission path of specific export enterprises, industry profit distribution, or valuation comparison with domestic demand sectors, I recommend enabling the

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[0] Jinling AI Chart (2025 Schematic of Divergence Between Trade Surplus and Economic Indicators)
[1] Wall Street Journal Chinese Edition: “China’s Trade Surplus Exceeds $1 Trillion, Highlighting Its Export Dominance” (https://cn.wsj.com/articles/china-exports-bounce-back-trade-surplus-powers-past-1-trillion-4a91e48c)
[2] Wall Street Journal Chinese Edition: “China’s Economic Indicators Deteriorate Across the Board” (https://cn.wsj.com/articles/china-seconomic-activity-loses-steam-3d668020)