China's trillion-dollar trade surplus reflects deeper structural issues, not just exports: Report
New Delhi, Oct 5
China's record trade surplus, which exceeded $1 trillion in 2025 has reignited concerns over global economic imbalances, but the surplus is rooted in structural weaknesses within the Chinese economy rather than industrial policy or exchange-rate management, according to a report.
According to analysis by East Asia Forum, China's external imbalance primarily reflects a persistent gap between national savings and domestic investment, driven by demographic, financial and fiscal factors.
While industrial upgrading, expanding manufacturing capacity and shifting export markets have shaped the composition of China's trade surplus, they do not fully explain why savings continue to outpace investment, it said. Instead, structural factors play a bigger role.
Among them are demographic trends, including a skewed gender ratio that has encouraged higher household savings and a financial system that historically favours state-owned enterprises, forcing many private firms to rely on retained earnings to finance growth and thereby boosting corporate savings.
The report further highlighted that the surplus should not be viewed as a sign of economic strength but as a reflection of weak domestic consumption.
That weakness has been exacerbated by fiscal pressures facing local governments following the prolonged property market downturn.
Moreover, China's land-sale revenues -- a key source of local government funding -- have fallen from about 10 per cent of GDP in 2021 to less than 5 per cent in 2025.
As revenues shrank, heavily indebted local authorities increasingly delayed payments to contractors and public-sector workers.
These arrears, estimated at around 10 trillion yuan or 7 per cent of GDP have weighed on business investment, employment and household spending, according to the report.
Facing sluggish demand and intense competition at home, Chinese firms are increasingly expanding overseas, intensifying competition in global manufacturing markets.
While consumers and downstream industries worldwide benefit from cheaper and more diverse products, manufacturers in importing countries face growing competitive pressure.
Trade barriers and short-term stimulus measures are unlikely to resolve the imbalance, according to the report.
"External rebalancing will be gradual. Trade restrictions abroad will not fix the underlying savings-investment gap, nor will short-term liquidity measures at home," it said.
— IANS
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