China's Economic Trade Surplus
In 2025, China achieved a record trade surplus of $1.2 trillion, indicating potential weaknesses in its economic structure despite appearing resilient against various challenges.
Challenges to China's Economy
- Domestic weaknesses and faltering global growth.
- Targeted policies from the new US administration against Chinese exports.
China's Economic Model and Issues
China’s growth model, reliant on state-directed investment and exports, has become outdated. This model is financed by financial repression, requiring excess household savings directed to the state, resulting in economic imbalances.
- Investment-heavy and consumption-poor framework requires a surplus of savings.
- Political and economic reforms needed to address imbalances, but reforms threaten existing power structures.
Consequences of Economic Imbalance
China's failure to reform has significant implications for global politics and development.
- Rise of populist politics in the US and the West, destabilizing global trade systems.
- Disruption of the natural development ladder, hindering poorer countries from entering low-end manufacturing.
- Limited domestic demand with restricted consumer spending on global goods.
International Implications
The continuation of these imbalances can lead to crises, such as trade tensions with the US. These issues are expected to escalate until significant changes are made by the Chinese Communist Party.
