WIREDGOV

EXPERT COMMENT

China’s surging high-tech competitiveness, weak appetite for imports and undervalued renminbi have fuelled the huge surplus – but the trend is unsustainable.

China’s goods trade surplus with the world has surpassed $1trillion this year for the first time. According to official data announced on Monday, China’s merchandise trade surplus rose $111.7 billion in November to notch up a surplus of $1.08 trillion in the first 11 months of the year, up 22.1 per cent from the same period last year. 

Estimates for the full-year surplus vary. But Capital Economics, a London-based research firm, forecasts it will rise to a total $1.23 trillion, equivalent to just over one per cent of global GDP. 

At that level, China’s full-year trade surplus is set to rank as the largest (as a percentage of global GDP) in recent history and will be roughly on a par with the extraordinary surpluses that the United States recorded during the Second World War. This reveals much about how China’s place in the global economy is changing.

One important shift contributing to the surplus is the sharp increase in high-tech Chinese exports, a trend that is dealing shocks to competitors in the West. A jump in trade with non-US markets, including the EU and Global South countries, has helped Beijing shrug off the impact of US tariffs. Meanwhile, Chinese demand for imports has largely flatlined in recent years, as Chinese brands gain ground on Western counterparts. 

The huge trade surplus is remarkable, but likely unsustainable – drawing attention to China’s undervalued renminbi currency.

Click here to continue reading the full version of this Expert Comment on the Chatham House website.