China announced on Monday that its trade surplus reached almost $1 trillion last year as its exports overwhelmed the globe, while the country’s own businesses and households cautiously spent on imports.
When adjusted for inflation, China’s trade surplus last year far exceeded that of the world in the last century, even those of export powers such as Germany, Japan or the United States. Chinese factories are dominating global manufacturing on a scale that no country has experienced since the United States after World War II.
The dumping of goods from Chinese factories has drawn criticism from an ever-lengthening list of China’s trading partners. Industrialized and developing countries have imposed tariffs, trying to slow the tide. In many cases, China has retaliated in kind, bringing the world closer to a trade war that could further destabilize the global economy.
President-elect Donald J. Trump, who will take office next week, has threatened to escalate already aggressive US trade policies targeting China.
On Monday, China’s General Administration of Customs said the country exported $3.58 trillion in goods and services last year, while importing $2.59 trillion. The $990 billion surplus 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 Mr. Trump takes office and starts raising tariffs, pushed China to a new record one-month surplus of $104.8 billion.
While China had a deficit in oil and other natural resources, its trade surplus in manufactured goods represented 10 percent of China’s economy. By comparison, U.S. reliance 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 exports and switched to wartime production.
Many countries run trade surpluses in manufactured goods because factories create jobs and are important to national security. Trade surplus is the amount by which exports exceed imports.
China’s exports of everything from cars to solar panels have been an economic asset to the country. Exports have created millions of jobs not only for factory workers, whose inflation-adjusted wages have doubled in the past decade, but also for high-earning engineers, designers and scientists.
At the same time, imports of factory goods from China have slowed significantly. The country has pursued national self-reliance over the past two decades, notably through its Made in China 2025 policy, for which Beijing pledged $300 billion to promote advanced manufacturing.
China has gone from importing cars to becoming the world’s largest car exporter, surpassing Japan, South Korea, Mexico and Germany. A Chinese state-owned enterprise has begun manufacturing single-aisle commercial jets in a bid to one day replace Airbus and Boeing jets. Chinese companies produce almost all the solar panels in the world.
China’s exports are booming while its domestic economy is suffering. The trade surplus has offset some of the damage from a housing market crash that has hurt 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 either on imports or on local goods and services.
China’s factory overbuilding is starting to hurt many Chinese companies, which are facing falling prices, heavy losses and even loan defaults.
Reaction to China’s trade imbalance has come 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 last year on cars from China. But some of the most extensive barriers to China’s exports have been imposed by less wealthy countries with middle-income manufacturing sectors, such as Brazil, Turkey, India and Indonesia. They have been on the cusp of industrialization, but they fear it may run away.
China’s export volume has grown by more than 12 percent annually. The dollar value of its exports has grown at half that rate, as prices fell because Chinese companies were producing even more goods than foreign buyers were willing to buy.
The Biden administration, dating back to Mr. Trump’s first term, has led what has become bipartisan criticism that Beijing is using its control over China’s state-owned banks to overinvest in factory capacity. Net bank lending to industry was $83 billion in 2019, before the pandemic. That rose to $670 billion by 2023, although the pace slowed somewhat in the first nine months of last year.
“China is making a big mistake of producing two to three times domestic demand in a number of areas, whether it’s steel or robotics or electric vehicles, lithium batteries, solar panels, and then exporting the excess around the world.,” said R. Nicholas Burns, the US ambassador to China.
At a press conference on Monday, Wang Lingjun, vice minister of customs administration, rejected such criticism. “It is basically protectionism to oppose China’s development,” he said.
China has not run a trade deficit since 1993. Its 2024 trade surplus dwarfs previous records when adjusted for inflation. Japan’s surplus, for example, peaked in 1993 at $96 billion. That amounts to $185 billion in today’s dollars, or less than a fifth of China’s surplus last year.
Germany ran large trade surpluses in the years following Europe’s financial crisis a decade ago. But its surplus peaked in 2017 at an amount equivalent to $326 billion in today’s money.
The trade surpluses of Japan and Germany each amounted to about 1 percent of the economic output of the rest of the world. China’s trade surpluses are twice that size, said Brad Setser, a senior fellow at the Council on Foreign Relations.
“As of 2021, China has turned to exports in a big way — and its export growth is increasingly coming at the expense of other heavy manufacturing economies around the world,” he said.
According to researchers at the Federal Reserve Bank of St. Most were relatively small, in today’s dollars.
After World War II, with much of Europe and East Asia in ruins, American factories shifted from tanks and rifles to cars and washing machines. The post-war US trade surplus peaked at $12 billion in 1947, which amounts to about $130 billion in today’s dollars. But because the rest of the world’s output was severely depressed that year, the American trade surplus was equal to about 4 percent of the global economy. This is a level that China has not yet reached.
China’s widening trade surplus accounted for up to half of the entire country’s economic growth last year. Investments in new factories for export represented the rest of the increase. In a report scheduled for Friday, China’s government is expected to say the country’s economy expanded about 5 percent last year.
China now produces about a third of the world’s manufactured goods, according to the United Nations Industrial Development Organization. That’s more than the United States, Japan, Germany, South Korea and Britain combined.
China has boosted its exports through heavy investment in education, factories and infrastructure, while maintaining fairly high tariffs and other barriers to imports. The universities produce more graduates in engineering and related subjects each year than the total graduates in all majors from American colleges and universities.
The question is whether China can maintain its lead if other countries raise tariffs. However, many importers find that China remains the most competitive country to buy goods from.
Eric Poses, the owner and chief executive of All Things Equal, a Miami Beach firm that invents and distributes board games and tabletop slots, uses suppliers in Shanghai. Board game printing costs twice as much in the United States, and the United States doesn’t even produce much of the electronics needed for board games.
“I’d like to do it here in a cost-effective way, but it’s just not possible,” he said.
