China announced Monday that its trade surplus reached nearly $1 trillion last year as its exports swamped the world while the country's own businesses and households spent cautiously on imports.
Adjusted for inflation, China's trade surplus last year was far larger than that of the world in the past century, even that of export superpowers such as Germany, Japan or the United States. Chinese factories dominate global manufacturing on a scale no country has seen since the United States after World War II.
The outpouring of goods from Chinese factories has drawn criticism from a growing list of China's trading partners. Both industrialized and developing countries have imposed tariffs in an attempt to slow the tide. In many cases, China has retaliated in kind, pushing the world closer to a trade war that could further destabilize the global economy.
President-elect Donald J. Trump, who takes office next week, has threatened to escalate the already aggressive US trade policy aimed at China.
On Monday, China's General Administration of Customs said the country exported $3.58 trillion worth of goods and services last year, while it imported $2.59 trillion. The resulting surplus of $990 billion broke China's previous record of $838 billion in 2022.
Strong exports in December, including some that may have been rushed to the United States before Trump could come to power and start raising tariffs, pushed China to a new record one-month surplus of $104.8 billion .
While China was short of oil and other natural resources, its trade surplus in manufactured goods represented 10 percent of the Chinese economy. By comparison, U.S. dependence on trade surpluses in manufactured goods peaked at 6 percent of U.S. output at the start of World War I, when factories in Europe had largely stopped exporting and switched to wartime production.
Many countries strive for trade surpluses in manufactured goods because factories create jobs and are important to national security. A trade surplus is the amount by which exports exceed imports.
China's exports of everything from cars to solar panels have been an economic boon to the country. Exports have created millions of jobs not only for factory workers, whose inflation-adjusted wages have roughly doubled over the past decade, but also for high-earning engineers, designers and research scientists.
At the same time, Chinese imports of manufactured goods have declined sharply. The country has pursued national self-reliance over the past two decades, most notably through its Made in China 2025 policy, for which Beijing has pledged $300 billion to promote advanced manufacturing.
China has gone from importing cars to becoming the world's largest auto exporter, surpassing Japan, South Korea, Mexico and Germany. A Chinese state-owned company has started making single-aisle commercial jetliners in an effort to one day replace Airbus and Boeing planes. Chinese companies produce almost all of the world's solar panels.
Chinese exports are booming while the domestic economy is suffering. The trade surplus has offset some of the damage caused by the housing market crash that hit businesses and consumers. Millions of construction workers have lost their jobs, while China's middle class has lost much of its savings. This has made many families reluctant to spend money on imports or domestic goods and services.
The overbuilding of Chinese factories is starting to hurt many Chinese companies, which face falling prices, heavy losses and even loan defaults.
The response to China's trade imbalance comes from both industrialized and developing countries. Governments are concerned about factory closures and job losses in manufacturing sectors that cannot compete with low prices from China.
The European Union and the United States raised tariffs on cars from China last year. But some of the biggest barriers to Chinese exports have been erected by less prosperous countries with middle-income manufacturing sectors, such as Brazil, Turkey, India and Indonesia. They are on the cusp of industrialization, but fear it could slip away.
The volume of Chinese exports has increased by more than 12 percent per year. The dollar value of Chinese exports has grown at half that pace, while prices fell as Chinese companies produced even more goods than foreign buyers were willing to buy.
The Biden administration, following Trump's first term, has led what has become bipartisan criticism that Beijing is using its control over China's state-owned banks to invest excessively in factory capacity. Banks' net lending to industry was $83 billion in 2019, before the pandemic. That rose to $670 billion in 2023, although the pace slowed somewhat in the first nine months of last year.
“China is making a big mistake by producing two to three times domestic demand in a number of areas, whether in steel, robotics or electric vehicles, lithium batteries and solar panels, and then exporting the surplus around the world.,” said R. Nicholas Burns, the US ambassador to China.
At a news briefing on Monday, Wang Lingjun, vice minister of the Customs Administration, rejected such criticism. “It is essentially protectionism to prevent China's development,” he said.
China has not had a trade deficit since 1993. The 2024 trade surplus exceeds previous records when adjusted for inflation. For example, Japan's surplus peaked at $96 billion in 1993. That amounts to $185 billion in today's dollars, or less than a fifth of China's surplus last year.
Germany had huge trade surpluses in the years after the European financial crisis ten years ago. But the surplus peaked in 2017 at an amount equivalent to $326 billion in today's currency.
Japan and Germany's trade surpluses each amounted to about 1 percent of the rest of the world's economic output. According to Brad Setser, a senior fellow at the Council on Foreign Relations, China's trade surpluses are twice as large.
“Since 2021, China has returned to exports in a big way – and export growth is increasingly coming at the expense of other manufacturing-heavy economies around the world,” he said.
According to researchers at the Federal Reserve Bank of St. Louis, the United States experienced persistent trade surpluses between 1870 and 1970. Most were relatively small, in today's dollars.
After World War II, with much of Europe and East Asia in ruins, American factories switched from tanks and guns to cars and washing machines. The U.S. postwar trade surplus peaked at $12 billion in 1947, which amounts to about $130 billion in today's dollars. But with the rest of world production under severe pressure that year, the US trade surplus amounted to about 4 percent of the world economy. That is a level that China has not yet reached.
The increase in China's trade surplus was responsible for about half of the entire country's economic growth last year. Investments in new factories for export accounted for much of the rest of the growth. In a report scheduled for Friday, the Chinese government is expected to say the country's economy grew by about 5 percent last year.
According to the United Nations Industrial Development Organization, China now produces about a third of the world's manufactured goods. That's more than the United States, Japan, Germany, South Korea and Great Britain combined.
China has built up its exports through massive investments in education, factories and infrastructure, while maintaining fairly high tariffs and other import barriers. Universities produce more graduates in engineering and related subjects each year than the combined total of graduates in all majors from U.S. colleges and universities.
The question is whether China can maintain its lead if other countries raise tariffs. Yet many importers believe that China is still the most competitive place to buy goods.
Eric Poses, the owner and CEO of All Things Equal, a Miami Beach company that invents and distributes board games and electronic table games, uses suppliers in Shanghai. Printing board games costs twice as much in the United States, yet the United States doesn't even produce many of the electronics needed for the table games.
“I wish I could do it here in a cost-effective way, but that's just not possible,” he said.
