'Weakness of China’s domestic economy is hidden in massive trade surplus'

New Delhi, Jan 11 While China has accumulated a massive trade surplus of $1 trillion which is often seen as a reflection of the Asian giant as a manufacturing powerhouse, the truth is that it is also an indicator of weak domestic demand, a weakening Chinese currency, and a slowing economy, according to an article.

The International Monetary Fund has warned China against economic imbalances. A country of 1.4 billion people is too big to rely only on exports to ensure a high growth rate, IMF Managing Director Kristalina Georgieva has pointed out, according to the article on the Nepal Aaja news portal.

The continued dependence of Beijing on export-led growth may accentuate global tensions. It may provoke moves by other countries to curb imports from China, like the hike in tariffs by the US on Chinese imports, it stated.

Domestic demand in China has weakened as consumers have cut back on spending since the pandemic, that had led to large-scale job and income loss. The slump in the property market has also hit family wealth hard. Common people in China are now wary of spending large amounts. Comprehensive policies are needed to encourage the Chinese people to spend more, the IMF has said.

The large trade surplus that China is enjoying is also an indication of the weakening of the Chinese economy. The Chinese people are not spending enough on imported goods because of financial constraints, leading to a fall in imports to China and a rise in trade surplus. The slowing down of the rate of GDP growth to five per cent has also reduced the need for imported inputs of production, the article further stated.

In November 2025, Chinese exports increased by 5.9 per cent while imports increased by only 1.9 per cent.

The impression that this $1 trillion trade surplus portrays China as a manufacturing superpower is based on wrong premises. The additional tariff imposed by the US has reduced Chinese exports to a high-value market. Beijing has tried to offset this decline in exports to the US by increasing exports to economically weaker markets of Africa, Latin America, and Southeast Asia.

China has recorded a 26 per cent increase in exports to Africa, 14 per cent to Southeast Asia and 7.1 per cent to Latin America in November. Chinese exports to the European Union, too, have surged by 15 per cent from a year earlier, but the flip side of China’s exports is that the dumping of cheap products in Africa is having a devastating effect on the industries in the African countries, which are being slowly forced out of trade.

Evidently, to meet the requirements of these less affluent markets, manufacturers in China are cutting back on cost, and consequently also on quality. China is thus emerging as the hub of low-cost products of questionable standards. A vast repository of cheap labour has helped China achieve this rather dubious distinction, the article stated.

Observers believe that at the heart of the remarkable achievement of a $1 trillion trade surplus are ultra-low prices made possible through practices such as indifferent product quality, dumping, aggressive marketing, and deceptive trade tactics. Clearly, the benefits of this trade surplus do not percolate to Chinese labourers. In the textile sector, for instance, the average monthly salary of a worker in China in 2023 was calculated at $826, while in the US, the average monthly salary of a worker in the textile sector was calculated at $2,858.

The weakness in China’s economy is reflected in a mere 1.3 per cent increase in retail domestic sales during November, the lowest since 2022. The growth in industrial production slowed to a 15-month-low of 4.8 per cent. The property sector performed the worst in decades, with investments in property plunging nearly 16 per cent. Car sales went down by 8.5 per cent and home appliance sales by 19 per cent. China’s National Bureau of Statistics has admitted that domestic demand is insufficient.

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