China's merchandise trade surplus exceeded $1 trillion (approximately 1,338 trillion won) in the first 10 months of this year, driven by strong exports amid explosive growth in the artificial intelligence (AI) and semiconductor industries. If the current trend continues, the surplus is expected to reach at least $1.2 trillion this year, surpassing last year's $1.18898 trillion and setting a new record. China's foreign exchange reserves are also likely to increase substantially as a result.

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A port in Shanghai, often called China's economic capital, where cars, one of the country's major export products, are lined up. /Beijing Youth Daily

China's General Administration of Customs announced Tuesday that the country's merchandise trade surplus reached $1.04259 trillion in the January–October period, up 8% from $964.82 billion during the same period last year. China's annual merchandise trade surplus surpassed the $1 trillion mark for the first time last November, when the cumulative surplus reached $1.07585 trillion. This year, however, China has reached the milestone for the second time, a full month earlier than last year.

As a result, trade pressure from major trading partners, including the United States and the European Union (EU), is expected to intensify. In particular, the United States appears certain to step up its trade and tariff pressure even more aggressively starting next year. Commenting on the situation, Gu Junyue, a Beijing-based economic commentator, said, "China's annual merchandise trade surplus now appears to have firmly entered the $1 trillion era. This is truly a historic milestone. However, given the growing trade pressure from the West, China still has a long way to go." He suggested that the outlook is not necessarily entirely optimistic.

Nevertheless, the massive merchandise trade surplus is expected to contribute significantly to the growth of China's foreign exchange reserves. Of course, a larger trade surplus does not necessarily guarantee a substantial increase in foreign exchange reserves. Even so, it is difficult to deny that it has a positive impact. This may explain why Beijing-based sources familiar with China's economy expect the country's foreign exchange reserves, projected to reach at least $3.41 trillion by the end of this year, to easily surpass $3.5 trillion next year and move toward the $4 trillion mark.

                                                                                                            Hong Soon-do