In-depth Analysis of the Impact of China's 'Record High Trade Surplus Amid Domestic Deflation and Rising Unemployment' Phenomenon on A-Share Investments

Based on the macroeconomic contradiction you mentioned, I will systematically analyze its impact on the A-share market and investment insights from a professional investment perspective.

Data reveals key issues: In the first 11 months of 2025, the export share of mechanical and electrical products reached

(up 8.8% YoY), while the share of labor-intensive products dropped to (down 3.5% YoY)[4]. Specifically:

• Integrated circuit exports:
  1.29 trillion yuan
  (up
  25.6%
  )
• Automobile exports:
  896.9 billion yuan
  (up
  17.6%
  )
• Ship exports:
  362.5 billion yuan
  (up
  27.8%
  )

These

have high automation levels and limited employment pull. As 36Kr analyzed: ‘Export data is impressive, but its pull on tax revenue and employment does not necessarily improve synchronously’[4].

China’s trade volume with the U.S. decreased by

YoY (its share dropped to ), while trade volume with ASEAN increased by YoY (its share rose to , remaining the largest)[4]. This implies:

• Surplus sources have shifted from the U.S. to Asian countries like Vietnam and Myanmar
• A large portion is
  re-export trade
  with limited actual added value
• The cumulative share of ‘Belt and Road’ countries has increased by more than
  10 percentage points

This is the most critical issue! Huatai Securities research points out:

[1]. However, Mou Yiling’s analysis reveals a surprising fact:

‘In the past 8 quarters, approximately

1 trillion USD

(about

7-8 trillion yuan

) has not been settled’[2]

This means that foreign exchange earned by export enterprises is

and has not been repatriated to form domestic purchasing power, leading to:

• Domestic M2 growth but low CPI (only
  0.7%
  )
• Sustained negative PPI growth (
  -2.2%
  )
• Insufficient domestic demand and persistent deflationary pressure

Notably, the settlement rate of export enterprises in October 2025 has

[2]. Mou Yiling points out:

• The absolute value of unsettled funds is
  decreasing
• Core
  CPI has started to rebound
• Industrial enterprise profits have returned to positive territory
• It will take about half a year to transmit to per capita disposable income

This is similar to Japan’s experience in

: Fund repatriation by overseas enterprises → Narrowing of housing price declines → CPI returning to positive → Stock market rising[2].

---

• High-growth export enterprises not only earn foreign exchange but also, more importantly, gain
  RMB appreciation benefits when funds are repatriated and settled
• But be alert to ‘fake export enterprises’: those engaged only in re-export trade with low added value

1. High-end Manufacturing Leaders
   (technical barriers + global competitiveness)
   • Semiconductor equipment and materials: accelerated domestic substitution
   • New energy vehicles: export growth of
     17.6%
     , with technical and cost advantages
   • Shipbuilding: export growth of
     27.8%
     , increasing global market share

2. Technology-intensive Exports
   (high automation level, high gross margin)
   • Integrated circuits: export growth of
     25.6%
     [5]
   • Photovoltaic and energy storage equipment
   • Industrial robots and automation equipment

• Avoid labor-intensive export enterprises (textiles, clothing, plastic products, etc., with declining exports)[4]
• Pay attention to the impact of tariff policy changes on specific industries

• Once
  7-8 trillion yuan
  of overseas funds are repatriated, they will form strong purchasing power[2]
• Refer to Japan’s 2005-2007 experience: fund repatriation → consumption recovery → stock market rise
• Central bank interest rate cuts and RRR reductions + fiscal efforts, domestic demand recovery is already underway

1. Consumption Upgrade Leaders
   benefit from improved income expectations
   • High-end liquor (strong social attributes, benefits from business activity recovery)
   • Medical aesthetics and medical services (high elasticity of optional consumption)
   • Brand consumption (rise of national trends + young consumption)

2. Core Assets
   benefit from foreign capital inflows
   • A-share core blue chips (CSI 300, SSE 50 components)
   • High-dividend central enterprises (fund repatriation pushes up valuations)

Allianz Investment points out that in 2026, the pattern of ‘old economy’ bottoming out and ‘new economy’ gaining momentum will continue[3].

• Traditional real estate industry chain
  : Be cautious, only focus on the ‘winner takes all’ opportunities of high-quality central enterprises
• Infrastructure investment
  : Government-led, but growth rate is limited; focus on ‘Two News and One Heavy’ (new infrastructure, new urbanization, major projects)

• Technological innovation
  : AI, energy storage, and power grid construction show ‘obvious recovery in prosperity’[3]
• Pharmaceutical innovation
  : One of China’s most globally competitive directions[3]
• High-end manufacturing
  : Driven by supply-side ‘anti-involution’ policies[3]

Policy core logic: Through industry integration and elimination of backward production capacity, improve industry structure.

1. Supply-side contraction industries
   • Photovoltaics, lithium batteries (capacity elimination in progress)
   • Chemicals, building materials (environmental protection production restrictions)
   • Steel, coal (carbon neutrality + state-owned enterprise reform)

2. Beneficiaries of increased industry concentration
   • Market share growth of leading enterprises
   • Profit margin improvement
   • Valuation repair

• Sustained negative PPI growth (
  -2.2%
  ) suppresses industrial enterprise profits
• Low CPI (
  0.7%
  ) inhibits consumption willingness
• Unemployment insurance expenditure increased by
  22%
  , indicating employment pressure

1. Avoid deflation-vulnerable industries
   • Mid-upstream manufacturing (price pressure)
   • Cyclical raw materials (weak demand)

2. Layout deflation-resistant industries
   • Necessary consumption (food and beverage, pharmaceuticals)
   • Public utilities (electricity, water supply)
   • High-dividend state-owned enterprises (stable cash flow)

---

• A-share core assets (CSI300, SSE50)
• High-dividend central enterprise blue chips
• Going global manufacturing leaders

• Tech growth (AI, semiconductors, new energy)
• Export industry chain niche leaders
• Policy themes (equipment renewal, trade-in for new)

1. Going Global Theme
   : Technology-intensive export leaders
   • Semiconductor equipment and materials
   • New energy vehicles and parts
   • Shipbuilding, high-end equipment

2. Domestic Demand Recovery Theme
   : Benefit from fund repatriation and improved income expectations
   • Consumption upgrade (liquor, medical aesthetics, brand consumption)
   • Pharmaceutical innovation (CXO, innovative drugs)
   • Financial real estate (high-quality central enterprises)

3. Technological Innovation Theme
   : Policy + industry cycle resonance
   • AI industry chain (computing power, applications)
   • Energy storage, power grid construction
   • High-end manufacturing (industrial automation, robots)

• Escalation of Sino-US trade frictions
• Global economic recession leading to declining external demand
• Exposure of domestic real estate risks

• Allocate safe-haven assets such as gold and U.S. bonds
• Maintain an appropriate cash position
• Diversified allocation (QDII funds, Stock Connect)

---

• Volatile Bottoming Period
  : Market volatility increases, policy expectation game
• Layout Window
  : Buy core assets and going global leaders on dips
• Key Focus
  : Settlement progress, CPI trend, policy strength

• Moderate Recovery Period
  : Fund repatriation effect emerges, domestic demand gradually repairs
• Main Uptrend Starts
  : Profit improvement + valuation repair resonance
• Key Focus
  : Extent of corporate profit improvement, moderate inflation recovery

• Structural Transformation Period
  : ‘New economy’ fully gains momentum, ‘old economy’ gradually cleared out
• New Bull Market Start
  : Driven by dual wheels of technological innovation + domestic demand recovery
• Key Focus
  : Industrial upgrading progress, demographic structure changes

---

• Structural deflation pressure remains
• Employment market is under pressure, consumption willingness is insufficient
• High dependence on external demand, geopolitical risks

• 7-8 trillion yuan
  of overseas funds to be repatriated, potential liquidity is abundant[2]
• Export structure upgrade, global competitiveness of technology-intensive industries improved
• Sufficient policy reserves, domestic demand recovery is only a matter of time
• A-share valuation is at a historical low, high safety margin

China is in the early stage of a benign cycle of ‘’. For A-share investors, the current point in time may be the starting point of a new bull market in the next 3-5 years.

• Strategically bullish on A-shares
  , especially core assets and technological innovation directions
• Tactically keep patience
  , pay attention to settlement progress and domestic demand recovery signals
• Structurally select individual stocks
  , focus on enterprises that truly benefit from industrial upgrading

---

[0] Jinling API Data (market indices, sector performance, etc.)

[1] Huatai Securities - “Four Pathways of Overseas Market Mapping to Domestic Markets” (Sina Finance, December 18, 2025)
https://finance.sina.com.cn/stock/marketresearch/2025-12-18/doc-inhceprt8721723.shtml

[2] Mou Yiling - “The Real Bull Market Has Not Started Yet, 2026 Stock Market Performance Will Be More Ideal” (Wall Street CN, 2025)
https://wallstreetcn.com/articles/3761741

[3] Allianz Investment - “‘This Time It’s Really Different’, Global Top Investment Institutions Speak Out!” (East Money, December 27, 2025)
http://fund.eastmoney.com/a/202512273603616562.html

[4] 36Kr - “2025: Export Hot, Life Cold” (December 23, 2025)
https://m.36kr.com/p/3607876816438279

[5] Securities Times - “November Foreign Trade Rebounds to 4.1%, Exports Rebound Led by Chips and New Energy Vehicles” (December 9, 2025)
https://www.stcn.com/article/detail/3531174.html

[6] J.P. Morgan Private Bank - “2026 Asia Outlook” (December 22, 2025)
https://privatebank.jpmorgan.com/apac/zh/insights/markets-and-investing/asf/2026-asia-outlook