China’s foreign exchange reserves barely budged last year despite a record US$1.18 trillion trade surplus, as the country’s massive external earnings increasingly wound up on the balance sheets of domestic households, commercial banks and corporations rather than in Beijing’s central coffers, a new report from the Institute of International Finance (IIF) shows. China has long been a major net creditor to the rest of the world. But in 2025, its non-reserve sector – banks, companies and investors operating outside the central bank’s reserve holdings – became a net creditor in its own right for the first time, according to the IIF report, published on Monday. By the end of 2025, the surge pushed total non-reserve external assets past US$8 trillion, more than double the size of the central bank’s official reserve stack. Commercial banks have stepped in as the chief conduits for these funds, giving private market participants greater control over currency conversion and asset allocation, the report said.