China Records $1.2T Surplus as Trade Flows Pivot Away from Dollar Hegemony

Despite aggressive tariff policies and “America First” protectionism, Chinas trade machine has not only survived but expanded, posting a record $1.2 trillion trade surplus in 2025. This divergence underscores a significant structural shift in global forex flows: while US-China direct trade shrinks, China is successfully rerouting its manufacturing capacity to the Global South and Europe.

The Great Pivot

Data reveals that while Chinese exports to the US plummeted by 20%, this was more than offset by surges elsewhere:

• Africa: +25.8%
• Southeast Asia: +13.4%
• European Union: +8.4%

“China has effectively positioned itself as the 'reliable partner' amidst US policy volatility,” noted Derek Irwin of Allspring Global Investments. This sentiment was bolstered by recent diplomatic visits from UK and Canadian leadership, signaling a pragmatic approach to trade ties despite political friction.

Yuan Internationalization Accelerates

The breakdown of traditional US-centric trade routes is accelerating the usage of the Renminbi (RMB). According to the latest data from the PBOC, over 50% of China's cross-border transactions are now settled in RMB, a figure that was near zero just 15 years ago.

This trend is further supported by capital market flows. Foreign inflows into China hit $100 billion in December, and foreign exchange reserves have climbed to a decade-high of $3.36 trillion.

For FX traders, the implication is a gradual decoupling of the Yuan from pure USD correlation. As the RMB becomes more deeply embedded in the trade invoices of the Global South (Latin America, Africa, SE Asia), its value will increasingly reflect a trade-weighted basket rather than bilateral US tensions.

While the USD remains dominant, the “weaponization” of the dollar via sanctions and tariffs appears to be inadvertently fast-tracking the development of a multipolar currency system.