'China's overcapacity, cheap exports taking world economy to brink of crisis'
New Delhi, Aug 14
China's relentless policy of driving exports and widening its trade surplus, by any means, has hit the manufacturing sector of advanced economies such as the United States and those in Europe, as well as developing countries in Africa, Asia, and Latin America, according to an article
China has completely ignored the global consensus that its overcapacity is harming other countries. However, now this problem is approaching a breaking point. And if that breaking point comes, the consequence could be a global economic crisis at a time when governments are particularly ill-equipped to manage the fallout, the article in Foreign Policy magazine laments.
Over the past two decades, China has established the largest trade surplus in recorded history. In 2025, this reached nearly $1.2 trillion, growing at three times the rate of global goods trade. This is politically and structurally unsustainable-creating an increasing and underappreciated risk to the entire global economy, according to the article by Michael B. G. Froman.
When the Chinese economy was much smaller, a strategy based on driving export growth at two or three times the rate of overall global economic growth was possible because there was sufficient global demand to absorb its exports. Today, however, China has a much larger economy and cannot continue on this trajectory without eventually running out of customers.
The article cites a UN report which states that China now accounts for roughly 30 per cent of global industrial production, and by 2030, it is expected to reach 45 per cent. With the exception of the US economy immediately after World War II, there is no historical precedent for such a concentration of industrial power. Measured as a share of global GDP, China's current manufactured goods surplus is greater than the combined surpluses of Germany and Japan at any point during the 1980s.
Since China has outgrown its economic model, the country's exports are bound to stall, which would create a major crisis in the world economy. A sudden slowdown in its economy would send shock waves around the world, especially among China's major trading partners, not only in the Asia Pacific but also in countries elsewhere whose economies have become intertwined with China's, the article observed.
The surest way to avoid this costly chain of events is a pre-emptive and gradual rebalancing of the Chinese economy. This has long been China's best path toward more sustainable growth, and a route the United States has advocated for years. But whereas in decades past it was a smart choice, now it is a necessity, the article concluded.
— IANS
Reader Comments
The West is finally waking up to what many developing nations have faced for decades. China's model of overproduction backed by state subsidies is unsustainable, and it's time for a global framework to address this. India should lead the dialogue at the WTO. 🇮🇳
I'm a bit skeptical about the article's narrative. China has lifted millions out of poverty and their products are affordable for the average Indian consumer. Yes, there's overcapacity, but blaming China alone is too simplistic. These are complex global supply chain issues.
India must learn from this. We can't rely on export-heavy models either. We need to strengthen our internal consumption, manufacturing base, and ensure our trade policies aren't just reactive but strategic. Atmanirbhar Bharat is the right direction forward.
Why is India not taking a stronger stance against China's trade practices? Our government talks a lot but action is needed. Look at how our markets are flooded with Chinese goods, from electronics to toys. We need stricter anti-dumping measures and better incentives for domestic producers.
The article makes a good point about the fragility of the global economy, but I wish it also acknowledged the role of the West's own policies. Decades of offshoring and deindustrialization created this dependency. A crisis is coming, but it's not just China's fault.
S We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.