Two-speed China: exports fly, corporate profits lag

China’s exports hit record highs in 2025, generating a USD 1.2 tn trade surplus, even as exporters faced an uphill battle during the year to tap new markets amid freefalling US orders. The shift, exporters tell Reuters, came at a hefty price tag in exchange for smaller, less profitable orders and more work, despite headline numbers suggesting a thriving global trade picture.

The export growth followed a pivot away from the US after President Donald Trump’s tariff hikes cut American orders by about a third. Chinese exporters shifted to markets in South America and Africa, where buyers often negotiated tougher terms and smaller orders. Meanwhile, industrial bottom lines fell 13.1% in November, the fastest decline in over a year.

A two-speed economy

Strong exports masked weaknesses at home: While China’s GDP grew 5% during the year, investment shrank, and consumption remained sluggish, Bloomberg notes. Government incentives, including a USD 72 bn loan-backing facility and interest subsidies for SMEs, aim to boost domestic spending and private investment. Still, interventionist policies, overcapacity, and declining household demand have left industrial profitability and wages under pressure.

Frontline realities

Manufacturers in China are struggling to keep their factories running, with widespread job cuts leaving many factories nearly empty, according to the Financial Times. The number of struggling companies — or “zombie companies” — has reached 12% of the total registered companies, more than doubling since 2018, according to a study by Natixis’ chief Asia-Pacific economist, Alicia García-Herrero.

The contrast highlights China’s economic divide, as exports surge while domestic industries struggle, leaving workers and households with stagnant wages, layoffs, and few prospects, the FT claims. Analysts expect the divide to widen as Beijing doubles down on its export-led growth by supporting its high-tech sector to compete with the US — allowing the housing market to keep deflating.

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MARKETS THIS MORNING-

Asia-Pacific markets were broadly in the red this morning, weighed down by Washington’s threats of imposing tariffs on European countries over Greenland. Investors continued to pour into safe havens, driving up gold prices even further. The Hang Seng Index and mainland China’s CSI 300 were just marginally in the green, while other markets including Japan’s Nikkei and South Korea’s Kospi were trading down. Futures indicate Wall Street is in for a better start to trading, with Dow Jones, S&P 500, and Nasdaq futures trading up.

The values in the table above are listed according to the market position as of 3:30pm IST / 2pm GST.