Commentary: Is China's widening trade surplus a "squeeze" on other countries?

Recently, Chinese customs released August foreign trade data, and many Western media focused on "China's trade surplus exceeding 100 billion US dollars for the fourth consecutive month". For some time now, discussions about China's trade surplus have been heating up. Former US Trade Representative and current Chairman of the Council on Foreign Relations, Michael Froman, recently issued a statement stating that China's trade surplus continues to expand and that "the world will one day be unable to accommodate such a huge production capacity," thereby asserting that this will lead to the next global economic crisis.

It is a fact that China's foreign trade has a huge surplus; It is also true that some groups feel anxious about this. For example, China's competitive advantage formed by relying on a complete industrial chain has led to fierce market competition for domestic industries in the United States and Europe, which naturally creates a sense of crisis in related industries. In some developing countries, some people are concerned that the emergence of a large number of Chinese goods will narrow their own industrialization channels. From a macroeconomic perspective, the academic community has long discussed the issue of global current account imbalances. When global aggregate demand is weak, large surpluses can easily amplify market competition and stimulate protectionist impulses in various countries.

These concerns have their own reasons, but the board cannot hit China. The trade surplus is the result of the joint action of global division of labor and the savings and consumption structure of various countries, and is not a deliberate goal pursued by China. China has been continuously expanding domestic demand and actively increasing imports for many years, and has been actively promoting trade balance. The long-term high consumption, low savings, and huge fiscal deficits of the United States and Europe are themselves an important part of global imbalances, but they are completely hidden in the discourse. Moreover, the pain brought about by the transition of old and new kinetic energy is a test that all countries, including China, must face.

The ability to export goods indicates that there are people willing to purchase in the international market. The production of products by a country exceeds its own consumption, and meeting the needs of other countries through trade is the foundation of international division of labor. The areas where China's exports will experience rapid growth in 2025 include integrated circuits, mechanical equipment, and new energy vehicles. These correspond to the real new demands brought about by global energy transformation and industrial upgrading, rather than the production capacity created out of thin air. It has made a tangible incremental contribution by transforming the demand side of the international market from 'unavailable' to 'affordable'.

The real problem is that some people deliberately provoke and exploit the "surplus anxiety" towards China, politicizing and weaponizing this economic phenomenon, equating it with the so-called "China squeeze theory" and "China shock theory". But the reality is that from 2012 to 2024, China exported textile machinery to developing countries worth over 30 billion US dollars, helping some Southeast Asian and South Asian countries develop into important textile producers and exporters. China exports infrastructure, equipment, technology, and investment to developing countries to help them improve their infrastructure, cultivate local industries, and provide a different path of industrialization cooperation from the West. If China's exports are really squeezing the manufacturing space of other countries, then these facts cannot be discussed.

From a historical perspective, trade surplus has never been the "patent" of any country, and no global economic crisis has been proven to be directly triggered by trade surplus itself. Britain in the 19th century, the United States in the 20th century, Japan and Germany after World War II all maintained large-scale trade surpluses at different stages, with Germany and Japan's current account surplus accounting for over 6% of GDP at one point. The emergence of these surplus countries is invariably the result of the evolution of the international division of labor pattern during a specific period, rather than a precursor to crisis. On the contrary, those attempts to "solve" the surplus problem through tariff barriers and trade restrictions have been repeatedly proven in history to exacerbate global economic tensions.

In fact, the concern that 'the world will not be able to accommodate such a large production capacity' is due to the sustained weakness in global aggregate demand. The root of this situation can be traced back to the 2008 international financial crisis. Lin Yifu, Dean of the Institute of New Structural Economics at Peking University, recently pointed out that before the financial crisis, the growth rate of world trade was more than twice that of the global economy; After the crisis, global economic growth slowed down, with trade growth rates lower than economic growth rates. Economic growth in the United States, Europe, OECD countries, and even globally has entered a long-term slump. Traditional industrial powers in the West generally face weak growth caused by manufacturing outflows, industrial hollowing out, and imbalanced employment structures. In other words, the reason why the global demand for this "cake" is not large enough is not because China has cut an extra piece, but because the entire "cake" production process went wrong after the financial crisis.

This also explains to some extent why the "China origin theory" of global crises is spreading among some populations in the United States. In 2008, there were problems with the supply of real estate in the United States, and subprime loans were securitized layer by layer. The decline in housing prices ultimately led to a credit freeze and liquidity depletion, triggering the international financial crisis that swept the world. Up to now, American society is highly sensitive to the spread of domestic imbalances among major powers. Some people directly transplant this logic to China's manufacturing industry, making judgments without considering the fundamental differences in economic structure, growth drivers, and development models between the two countries.

Ultimately, whether the "next global economic crisis" that American media is concerned about will occur depends on whether the world's major economies can handle industrial transformation, financial risks, and insufficient demand, as well as whether the world can eliminate the interference brought by the reverse flow of protectionism and continue to maintain open cooperation.