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China’s trade surplus – the difference between the value of goods it imports and exports – has hit $1 trillion for the first time, a significant yardstick in the country’s role as “factory of the world”, making everything from socks and curtains to electric cars.

For the first 11 months of this year, China’s exports rose to $3.4 trillion while its imports declined slightly to $2.3 trillion. That brought the country’s trade surplus to about $1 trillion, China’s General Administration of Customs said on Monday.

Shipments overseas from China have boomed despite US President Donald Trump’s global trade war, largely consisting of sweeping “reciprocal” tariffs on most countries, which were launched earlier this year in a bid to reduce US trade deficits.

But China, which was initially hit with US tariffs of 145 percent before they were lowered to allow for trade talks, has emerged largely unscathed from the standoff by stepping up shipments to markets outside the US.

Following Trump’s 2024 election win, China began diversifying its export market away from the US in exchange for closer ties with Southeast Asia and the European Union. It also established new production hubs, outside of China, for low-tariff access.

Why does China have such a large trade surplus?

China’s exports returned to growth last month following an unexpected dip in October, rising to 5.9 percent more than one year earlier and far outpacing a 1.9 percent rise in imports, according to China’s General Administration of Customs.

China’s goods surplus for the first 11 months of 2025 was up 21.7 percent from the same period last year. Most of the surge was driven by strong growth in high-tech goods, which outpaced the increase in overall exports by 5.4 percent.

Auto exports, especially for electric vehicles, rallied as Chinese firms muscled in on Japanese and German market share. Total car shipments jumped by more than one million to approximately 6.5 million units this year, according to data from China-based consultancy Automobility.

And although China still trails US leaders like Nvidia in advanced chips, it is becoming dominant in the production of semiconductors (used in everything from electric cars to medical devices). Semiconductor exports rose by 24.7 percent over the period.

China’s technological advances have also boosted shipbuilding, where exports rose 26.8 percent compared with the same period in 2024.

So, given the hostile global trade backdrop, how has China achieved this?

Rerouting and diversifying

Though Washington has lowered tariffs on Chinese imports in recent months, they remain high. Average import duties on Chinese goods currently stand at 37 percent. For this reason, Chinese shipments to the US have dropped by 29 percent year-on-year to November.

Some Chinese companies have shifted their production facilities to Southeast Asia, Mexico and Africa, enabling them to bypass Trump’s tariffs on goods arriving directly from China. Despite this, overall trade between the two countries remains down.

In the first eight months of this year, for instance, the US imported roughly $23bn in goods from Indonesia, an increase of nearly one-third on the same period in 2024. It is widely understood that the rise is down to Chinese goods being redirected via Indonesia.

“The role of trade rerouting in offsetting the drag from US tariffs still appears to be increasing,” Zichun Huang, an economist at Capital Economics, wrote in a note to clients on Monday. Huang added that “exports to Vietnam, the top [Chinese] rerouting hub, continued to grow rapidly.”

As trade with the US has slackened, China has doubled down on developing ties with other major trading partners. That includes a 15 percent surge in Chinese shipments to the EU, compared with the year before, and an 8.2 percent rise in exports to countries in Southeast Asia.

Weaker currency

Another reason for China’s trading success is that its currency has been cheap, compared with others, in recent years. A lower renminbi makes exports relatively inexpensive to produce, and imports relatively expensive to consume.

China maintains a “managed float” of the renminbi – meaning the central bank intervenes in foreign exchange markets to maintain its value against other currencies – with the aim of keeping the price stable.

For years, many economists have argued that China’s currency is undervalued. In their view, that gives exporters a competitive edge by boosting the appeal of cheap Chinese products at the expense of other countries, leading to large imbalances in trade.

Indeed, taking into account global inflationary dynamics, the real effective exchange rate – a measure of the competitiveness of Chinese goods – is actually at its weakest level since 2012.

How has China got here?

China’s eye-watering $1 trillion trade surplus – never before recorded in economic history – is the culmination of decades of industrial policies that have enabled China to emerge from a low-income agrarian society in the 1970s to become the world’s second-largest economy today.

China established itself as a dependable producer of low-cost manufactured goods, like T-shirts and shoes, in the 1980s. Since then, it has climbed the industrial ladder to higher-value goods, such as electric vehicles and solar panels.

By far its largest sector in terms of exports is electronics. China exported a total of more than $1 trillion-worth of electronic goods around the world in 2024. This follows the pattern of other industrialised countries by starting with simple, labour-intensive goods and then moving into more complex sectors. However, China has done so with unusual scale and speed to cement its dominance across numerous global supply chains.

It also dominates trade in rare-earth metals, which are crucial for the manufacture of a wide range of goods from smartphones to fighter jets.

Twelve of the 17 rare earth metals on the periodic table can be found in China, and it mines between 60 percent and 70 percent of the world’s rare-earth resources. It also carries out 90 percent of the processing of these metals for commercial use.

For historical context, China’s trade surplus in factory goods is larger as a share of its economy than the US ran in the years after World War II, when most other manufacturing nations were emerging from the ruins of war.

How are other countries responding to China’s expanding dominance?

Many are looking for ways to redress the balance.

French President Emmanuel Macron, who visited China last week, warned the EU may take “strong measures”, including imposing higher tariffs, should Beijing fail to address the imbalance.

The EU already imposes additional tariffs on Chinese-made electric vehicles (EVs), which range from 17 percent to 35.3 percent, for example, on top of its existing 10 percent import duty.
Germany’s foreign minister, Johann Wadephul, arrived in China for a two-day trip on Monday this week, becoming the latest senior European official to visit for talks amid the country’s rapidly expanding goods trade with Europe.

Before his trip, Wadephul said he planned to raise the issue of tariffs with his Chinese counterparts, particularly those involving rare earths, in addition to concerns about industrial “overcapacities”, which he said are distorting global prices for industrial goods.

Will China’s exports continue to grow?

Despite efforts by the US and other wealthy countries to diversify away from China, few economists expect the country’s broad-based trade momentum to slow anytime soon.

Economists at Morgan Stanley predict China’s share of global goods exports will reach 16.5 percent by the end of the decade, up from 15 percent now, reflecting China’s ability to adapt quickly to shifting global demand.

Yemen’s main southern separatist group, the Southern Transitional Council (STC), claims it has consolidated control across the country’s south.

The announcement on Monday, which marks a major power shift, comes following a military operation launched last week.

Eight southern governorates “are under the protection of the Southern Armed Forces”, including the port city of Aden, STC representative Amr al-Bidh told Reuters news agency.

“We are concentrating on unifying the operational theatre of our armed forces to enhance coordination and readiness to reinforce stability and security in the south, as well as combating the Houthis should there be a willingness to head in this direction.”

Yemen’s internationally recognised government, known as the Presidential Leadership Council (PLC), criticised the separatists, calling their “unilateral” actions a “blatant violation of the transitional phase’s framework”.

The government controls the provinces of Marib and Taiz.

Yemen has been embroiled in a civil war since 2015 between the Iranian-backed Houthis and the central government in Sanaa.

While the STC opposes the Houthis, and is part of the PLC, the group has previously called for the separation of the southern region from Yemen.

Yemen remains fragile and fragmented, with three main entities controlling most of the country and smaller groups maintaining influence in select regions.

Here is what you need to know about the different groups ruling Yemen.

Southern Transitional Council

The STC is a southern Yemeni separatist movement formed on May 11, 2017.

It emerged after mass protests in Aden against the dismissal of its leader, Aidarus al‑Zoubaidi, who became head of the 26-member council and sits on the PLC.

The council’s declared aim is to “reinstate the Southern State” – a reference to the independent state that existed in the south before unification with the north, between 1967 and 1990.

With backing from a regional power, the STC exerts control over a number of paramilitary forces originally known as the “Security Belt”, now often referred to broadly as the Southern Armed Forces.

Over time, the STC has gained significant territorial and political influence in southern Yemen – most notably capturing the port city of Aden.

It has repeatedly declared self-rule in areas under its control, citing government corruption and misgovernance.

Although the STC has sometimes entered into power-sharing arrangements with Yemen’s internationally recognised government, its underlying demand remains southern autonomy or independence.

Last week, the STC stormed large parts of the oil-rich Hadramout governorate, including the presidential palace of Seiyun. It claims it wanted to “restore stability and bring an end to the state of security breakdown, and halt the exploitation of the region by forces alien to the valley [of Hadramout] and the governorate”.

Presidential Leadership Council

The PLC was established in 2022 when former Yemen President Abd-Rabbu Mansour Hadi formally transferred his powers to the new eight-member body.

Its mandate is to manage Yemen’s political, security, and military affairs during a transitional period and to steer negotiations towards a permanent ceasefire.

It is chaired by Rashad al-Alimi, an adviser to Hadi and former interior minister with the government of late President Ali Abdullah Saleh.

Its membership is drawn from a mix of northern and southern politicians and military-linked leaders — including the STC — in a bid to unite major anti-Houthi forces under one roof.

At the PLC’s inception, al-Alimi pledged to end the civil war, provide economic stability, and alleviate the humanitarian crises in the country as its top priorities.

However, since 2022, internal divisions among the PLC’s members — who represent differing political and regional interests — have deepened, making it largely ineffective.

Houthis

Ansar Allah, commonly referred to as the Houthis, is a group armed and trained by Iran and now exerting control of at least five provinces in the north and northwestern parts of the country, including the capital city, Sanaa. It also controls several regions bordering Saudi Arabia.

Originating in the 1990s, the Houthis had at least six wars with Yemen’s government forces during the era of ousted leader Ali Abdullah Saleh. Saleh had to abandon his presidency in the wake of mass protests against his rule during the Arab Spring, which broke out in 2011.

The Houthis grew stronger and became eager to consolidate their grip on power. The group drew global attention in 2014 when they launched an armed uprising against Yemen’s government, forcing former president Hadi to flee the capital and subsequently step down from office.

This takeover led to the government’s collapse and triggered a major political crisis and military collapse. It also worsened the severe humanitarian conditions in the country, which is considered one of the poorest in the world. In the years that followed, the Houthis withstood a wide Saudi-led Arab military coalition.

Since 2022, the fighting has largely frozen, though occasional clashes and shifts in military positions have continued.

In November 2023, the Houthis began targeting civilian and military vessels suspected of having Israeli ties, a campaign aimed at pressuring Israel to halt its genocidal war in Gaza, which began on October 7, 2023.