China, on Monday, January 13, announced that its trade surplus in 2024 reached almost $1 trillion.
The mentioned result, which is a record for an Asian country, has become a fact of economic reality in large part because Beijing’s export activities continue to expand globally. Also, in this case, the impact on the final indicator was the fact that Chinese businesses and households have demonstrated a high level of caution in spending on imported goods over the past year.
When adjusted for inflation, the Asian country’s trade surplus far exceeded the readings recorded in the world over the past century. It is worth noting separately that China has managed to outpace such global exporting giants as the United States, Japan, and Germany. Currently, Beijing continues to dominate the manufacturing sector. It’s worth clarifying in this case it is meant a leading position at the global level. Chinese manufacturing sites produce products on a massive scale, which in world economic history was last seen in the United States during World War II.
The flow of products from factories based in the Asian country at some point found itself in the zone of negative criticism from Beijing’s trading partners, the list of which is consistently expanding. To slow the tide, both industrialized and developing states imposed tariffs. In most of these cases, China decides on retaliatory measures. Within the framework of the relevant state of affairs in the global trade space, tensions are increasing and what can be called the space of free or largely free interaction between countries is being limited. The continuation and expansion of this situation is a negative factor as the prospect of an impact on the global economy, which is already facing uncertainty and is under pressure from such circumstances as the present reality configuration of the current historical moment, as the gradual deterioration of the geopolitical condition. Today, there is a growing tension in the interaction between many countries. The corresponding process, which is the deterioration of the geopolitical situation, is particularly sensitive and, in fact, most significantly reflected in the framework of relations between Beijing and Washington. The interaction between the United States and China is on a trajectory of progressive deterioration, containing the risk that at some point in this downward dynamic, a kind of point of no return will be crossed, after which a fundamental and structural degradation of the two countries’ ability to cooperate will begin. Washington has already limited shipments of advanced chips and equipment for manufacturing microcircuits of the appropriate category to the Asian country. As part of the retaliatory measures, China has banned the export of several minerals to the United States. The practice of mutual restrictions will likely continue. Washington has repeatedly stated its intention to expand the relevant measures. Beijing is demonstrating its readiness for retaliatory actions. Against the background of the continuation and both qualitative and quantitative scaling of the mentioned state of affairs, the threat of a global trade war is emerging, characterized by a high level of escalation, manifested in significant mutual restrictions and the termination of cooperation in many areas of interstate interaction. Obviously, the relevant prospects do not and in principle cannot contain any reason for hope for the prosperity of the global economy. Moreover, in this case, there is a risk of destabilization of the situation in the global economic space.
US President-elect Donald Trump, who will take office next week, announced his intention to tighten Washington’s trade policy during the election campaign and after winning the November elections. The relevant plan concerns, among other things, China.
China’s General Administration of Customs on Monday released information according to which the Asian country exported goods and services totaling $3.58 trillion last year. At the same time, the indicator of Chinese imports for the mentioned period was fixed at around $2.59 trillion. Beijing has recorded a surplus of $990 billion. This figure surpassed the preliminary record, which was recorded in 2022 and amounted to $838 billion.
Last year, Chinese exports grew by 5.9% year-on-year. The Asian country’s imports also were on an upward trajectory in 2024, but in this case, the growth turned out to be more moderate. The corresponding indicator increased by 1.1% year-on-year.
In December, Chinese exports showed strength and resilience. The media, citing experts, note that the current positions of the mentioned indicator are largely related to the fact that Chinese companies accelerated and increased shipments of products to the United States in anticipation of the inauguration of Donald Trump. The corresponding activity of the Asian country is related to the fact that Mr. Trump intends to raise tariffs on imported goods. For Beijing, the implementation of the mentioned plan will have sensitive consequences. Currently, the Chinese economy, which is the second largest in the world, continues with the negative impact of factors such as the protracted crisis in the real estate market, sluggish domestic consumer demand, and falling investor confidence. In this state of affairs, exports are perhaps the only driving force behind the upward dynamic of the Asian country’s economic system. Beijing can reduce the negative effects of rising tariffs on goods imported into the United States, but it will not be able to completely avoid the impact of this measure. Theoretically, the diversification of shipments can reduce the damage from the implementation of the mentioned intentions of Donald Trump, but it is extremely unlikely to cancel out the impact of this factor in the full sense.
In December, Beijing recorded a trade surplus of $104.8 billion. This figure is a record. It is worth clarifying that this implies the highest surplus ever recorded in one month.
While China was facing a shortage of oil and other natural resources, its trade surplus in industrial goods accounted for 10% of the country’s economy. It is worth noting that the United States’ reliance on trade surplus in industrial goods peaked at 6% of the total US output at the beginning of World War I. At that time in world history, European factories mostly stopped exporting and focused on wartime production.
It is worth noting that many countries are striving for a trade surplus in industrial goods. The corresponding desire is due to the fact that factories create jobs and are very important for ensuring national security in the economic dimension of the corresponding concept. Trade surplus is the amount by which exports exceed imports.
Chinese external shipments of products, including automobiles and solar panels, are an important component of the structure of the Asian country’s economic system. It is worth noting that exports were of great importance even before the world’s second-largest economy faced a crisis in the real estate market, weak domestic consumer activity, and a sharp decline in investor confidence. It was the high results demonstrated by activities related to external shipments that allowed Beijing to create millions of jobs. It is worth noting that this positive process has affected not only factory workers, whose inflation-adjusted wages have roughly doubled over the past decade, but also high-earning engineers, designers, and research scientists.
At the same time, Chinese imports of factory goods slowed sharply. Over the past two decades, the Asian country has been striving for self-sufficiency, including in the manufacturing sector. As part of its efforts, Beijing has pledged $300 billion to promote advanced manufacturing in the context of the Made in China 2025 policy.
The Asian country has minimized car imports. China has become the world’s largest exporter of related products. In terms of the volume of shipments from transport countries, the Asian country surpassed Japan, South Korea, Mexico, and Germany. Also, a Chinese state-owned enterprise has started production of single-aisle commercial jetliners. According to media reports, Beijing hopes to repeat its success achieved in the car-making sector in the aircraft manufacturing industry. It is possible that over time, the Chinese manufacturer of jetliners will eventually surpass Boeing and Airbus.
Chinese companies are also currently the world’s largest makers of solar panels. The Asian country dominates the global manufacturing of related products.
Chinese exports are growing at a time when the local economy as a whole is facing structural challenges that Beijing cannot ignore or perceive as points of minor impact. The above-mentioned crisis in the Asian country’s housing market has caused serious financial damage to businesses and consumers. Moreover, one of the consequences of this situation was that millions of construction workers lost their jobs. Also, the Chinese middle class was left without most of its savings amid the crisis in the real estate market. The result of this situation is that in an Asian country, many families have begun to adopt a very cautious approach to spending on both imported and domestic goods and services. Against this background, consumer activity has fallen, which has become a new challenge for China’s economic system.
It is also worth noting that the overbuilding of Chinese production sites has begun to harm many local companies, which are facing falling prices, large losses, and even loan defaults.
The sources of the negative reaction to the trade imbalance of the Asian country are both industrialized and developing countries. The governments of the mentioned countries are concerned about factory closures and job losses in the manufacturing sector due to the inability to compete with low prices in China. It is worth noting that the mentioned negative reaction already has specific practical consequences. Last year, the United States and the European Union increased tariffs on cars imported from China. At the same time, some of the biggest barriers to the continued scaling of Chinese exports globally have been put by affluent countries with middle-income manufacturing sectors. In this case, countries such as Brazil, India, Indonesia, and Turkey are meant. At the same time, the measures taken by New Delhi, Ankara, Jakarta, and Brasilia are not critically sensitive to the Chinese economy. The mentioned capitals approached the cusp of industrialization and began to fear that the realization of the corresponding prospect might be canceled or difficult to achieve against the background of China’s global scaling of exports, characterized by low prices.
The volume of shipments of goods and services from China is growing by more than 12% a year. At the same time, the dollar value of the Asian country’s exports shows an increase, the rate of which is twice as slow. This dynamic is related to falling prices, which resulted from Chinese companies producing more products than foreign consumers were willing to purchase.
There is currently a kind of bipartisan consensus in the United States about the negative perception that Beijing is using its control over the Asian country’s state-owned banks to over-invest in manufacturing facilities. China’s net lending industry by banks was $83 billion in 2019. This indicator was recorded before the outbreak of the coronavirus pandemic, which became a kind of shock factor for both the global economy as a whole and the economy of the Asian country in particular. By 2023, the mentioned figure had grown to $670 billion. At the same time, it is worth noting that the rate of increase in this indicator slowed down in the first nine months of 2024.
R. Nicholas Burns, the US ambassador to China, said Beijing is making a serious mistake by producing two to three times as many products as needed in the domestic market in a number of areas, including steel, robotics, electric vehicles, lithium batteries, and solar panels, and then exporting the excess all around the world.
At a news briefing on Monday, Wang Lingjun, vice minister of China’s customs administration, rejected the mentioned criticism. He described the allegations about Beijing’s erroneous actions as protectionism aimed at countering the development of the Asian country.
The volume of shipments of vehicles from China is expected to increase in 2025. The preliminary forecast predicts that the corresponding figure will grow by 5.8% to 6.2 million units. The mentioned prediction was published by the China Association of Automobile Manufacturers on Monday. At the same time, car sales in the Asian market are expected to increase this year. The corresponding forecast provides that the mentioned indicator will be on an upward trajectory due to the impact of such a factor as the expansion of policy incentives.
Besides, Chinese customs data released on Monday shows that exports of rare earth minerals from the Asian country increased by 6% last year. It is worth noting that the dynamic of this indicator was slowed down by the fact that sluggish economic growth became a factor constraining domestic demand in the Asian country. In 2024, China shipped 55,431 metric tons of 17 minerals, which are used in the manufacture of products of various categories, including electric vehicles and consumer electronics.
It is worth noting that the total value of minerals exported by the Asian country in 2024 was fixed at $488.8 million. This indicator fell by 36%.
Chinese rare earth imports in 2024 amounted to 132,931 tons. This indicator showed a drop of 24.4%.
It is worth noting that China has not had a trade deficit since 1993. Locked in 2024, dwarfs trade surplus earlier records when adjusted for inflation. For example, the Japanese trade surplus peaked in 1993 at $96 billion. In terms of today’s dollars, the corresponding figure is $96 billion, or less than a fifth of last year’s Chinese surplus.
In the years following the financial crisis that Europe faced a decade ago, Germany had a huge trade surplus. In 2017, the corresponding figure reached a peak of $326 billion in today’s money.
German and Japanese trade surpluses exceeded approximately 1% of the total world’s economic output. In terms of this measure, China’s trade surplus is twice as large. This was announced by Brad Setser, a senior fellow at the Council on Foreign Relations. He also noted that starting in 2021, China is once again focused on exports, and external shipments of products from the Asian country are increasingly coming at the expense of other manufacturing-heavy economies around the world.
Data released by researchers at the Federal Reserve Bank of St. Louis shows that the United States consistently had trade surpluses between 1870 and 1970. Separately, it was noted that most of the mentioned indicators were relatively small in today’s dollars.
After World War II, when most of Europe was a space of massive destruction, US factories reoriented their production activities. Manufacturing sites located in the United States shifted from making tanks and rifles to manufacturing cars and washing machines. The US postwar trade surplus peaked at $12 billion in 1947, which is about $130 billion in today’s dollars. It is worth noting that the mentioned indicator was equivalent to about 4% of the global economy, which is because the world’s output was severely depressed. China has not reached that level yet.
The increase in trade surplus last year accounted for half of the total economic growth of the Asian country. The second half of this dynamic was secured by investments in new production sites focused on export shipments.
The media has released information according to which the Chinese government is currently expected to announce this week that the country’s economy has grow by about 5% in 2024. It is worth noting that it is the mentioned indicator that is the target of Beijing.
United Nations data shows China currently produces about a third of the world’s manufactured goods. This figure exceeds the combined reading of countries such as the United States, the United Kingdom, South Korea, Japan, and Germany.
The scaling up of China’s export activities is largely due to Beijing’s massive investments in education, factories, and infrastructure. At the same time, the Asian country maintains high tariffs and other barriers to imports. Every year, Chinese universities churn out more graduates of engineering and related disciplines than the total number of graduates in all majors from US colleges and universities.
It is currently unknown whether Beijing will be able to maintain its leadership in the face of increased tariffs on imported goods by other countries. In the context of the corresponding probability, the most sensitive blow for China may be the tightening of the United States trade policy. At the same time, it is worth noting separately that such measures are characterized by what can be called bilateral consequences. Experts warn that the likely increase in tariffs on imported goods, which Donald Trump has repeatedly stated, could trigger an acceleration of inflation in the United States. Moreover, such actions will become a factor in increasing tensions in the global trade space as a whole, and not just in individual regional segments.
Many importers continue to hold the view that China continues to be the most competitive place to buy goods.
Eric Poses, the owner and chief executive officer of All Things Equal, a Miami Beach company that invents and distributes board games and electronic tabletop games, uses suppliers in Shanghai. In the United States, printing board games costs twice as much as in China. Moreover, the US doesn’t produce many of the electronics needed for tabletop games. Eric Poses noted that it is impossible to carry out activities in a cost-effective way only in the United States, without any interaction with foreign companies.
Returning to the issue of the current condition of the Chinese economy, it is worth noting that after Beijing imposed stimulus measures in the second half of last year, signs of stabilization were recorded. For the third month in a row, there has been a moderate increase in factory activity in the Asian country.
Chinese imports of iron ore in 2024 showed growth for the second year in a row, reaching a new peak. This result is because lower prices stimulated purchases, while demand remained stable. At the same time, the protracted property crisis in China continues to be a factor of pressure on steel demand.
It is worth noting that an important indicator of the dynamics of Chinese imports is shipments from South Korea. Seoul reported that exports to China increased by 8.6% in December. This result indicates that Chinese consumers have a high demand for technological products. At the same time, domestic demand in the Asian country still remains insufficient to ensure intensive economic growth.
The current configuration of economic reality and domestic problems have formed sensitive challenges for the world’s second-largest economy. Beijing has a difficult road ahead to a period of unambiguous prosperity in the financial and material sense. At the same time, a positive outcome is not guaranteed, but the Chinese economy is not doomed.
