Why is China’s trade surplus not lifting foreign reserves?

Because private firms are keeping more dollars offshore. They repay foreign debt, build overseas assets, or leave earnings abroad. That reduces the amount the central bank needs to buy, so foreign reserves stay flatter. Valuation changes also matter, but the core driver is private capital outflows absorbing the surplus.

How could this affect SGD and Singapore markets?

Stable private outflows can support CNH liquidity and limit FX swings, which helps regional funding conditions. For Singapore, that points to calmer USD/SGD ranges and steadier trade finance, unless exports slow. If frictions rise, credit spreads can widen and hedging demand can increase, affecting bank funding and equity risk appetite.

What indicators show outflows are rising or slowing?

Look at SAFE balance-of-payments financial-account data, PBOC reserve changes adjusted for valuation, CNH funding rates, and cross-currency basis. Also watch monthly export data and corporate commentary on offshore debt repayment. A tighter CNH basis and rising onshore borrowing would suggest outflows are slowing and liquidity is shifting.

What is the near-term investment takeaway for Singapore retail investors?

Keep FX hedges active, prefer short-duration SGD income, and be selective in Asia credit. In equities, focus on cash-rich exporters and logistics while avoiding concentrated China beta. Use staggered entries, not single trades, and respond to data on exports, reserves, and CNH funding rather than headlines alone.

Global Market Insights

December 31: China’s $1T Trade Surplus Flows Offshore, Not to Reserves

ByHuzaifa Zahoor December 31, 2025December 31, 2025

On December 31, China $1 trillion trade surplu is shaping global flows in a quiet way. Much of the cash is staying offshore, paying down foreign debt and building overseas assets, instead of adding to foreign reserves. That pattern matters for Singapore, where funding costs, trade finance, and SGD moves are sensitive to regional liquidity. We explain why the surplus is not lifting reserves, how export surge dynamics buy time, and what Singapore investors should track now.