China announced on Monday that its trade surplus reached nearly $1 trillion last year as its exports swept the world, while the country’s businesses and households cautiously spent on imports.
When adjusted for inflation, China’s trade surplus last year far exceeded any in the world over the past century, even those of export superpowers like Germany, Japan or the United States. Chinese factories dominate global manufacturing on a scale not seen by any country since the United States since World War II.
The outpouring of goods from Chinese factories has drawn criticism from China’s growing list of trading partners. Industrialized and developing countries have raised tariffs, trying to stem 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 takes office next week, has threatened to escalate America’s already aggressive trade policy toward China.
On Monday, China’s General Administration of Customs said the country exported $3.58 trillion worth of goods and services last year, while importing $2.59 trillion. The resulting surplus of $990 billion broke China’s previous record of $838 billion in 2022.
Strong exports in December, including exports that may have been rushed to the United States before Mr. Trump takes office and starts raising tariffs, led China to a new record one-month surplus of $104.8 billion.
While China ran a deficit in oil and other natural resources, its trade surplus in manufactured goods represented 10 percent of the Chinese economy. By comparison, US reliance on trade surpluses in manufactured goods peaked at 6 percent of US output at the start of World War I, when factories in Europe largely stopped exporting and switched to war production.
Many countries seek trade surpluses in the production of 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 boon for the country. Exports have created millions of jobs not only for factory workers, whose inflation-adjusted wages have roughly doubled in the past decade, but also for high-paid engineers, designers and research scientists.
At the same time, China’s imports of manufactured goods slowed 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 being a car importer to the world’s largest car exporter, surpassing Japan, South Korea, Mexico and Germany. A state-owned Chinese company has begun producing single-aisle commercial jets in a bid to one day replace Airbus and Boeing jets. 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 from the housing market crash, which has scarred businesses and consumers. Millions of construction workers lost their jobs, while China’s middle class lost much of its savings. This has left many families reluctant to spend on imported or domestic goods and services.
The overbuilding of Chinese factories has started to hurt many Chinese companies, which are facing falling prices, heavy losses and even loan defaults.
The reaction to China’s trade imbalance is coming from 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 obstacles to Chinese exports have been posed by less affluent countries with middle-income manufacturing sectors, such as Brazil, Turkey, India and Indonesia. They were on the verge of industrialization, but they fear that it could slip away.
The volume of Chinese exports is growing by more than 12 percent annually. The dollar value of exports grew at half that rate, while prices fell as Chinese companies produced more goods than foreign buyers were willing to buy.
The Biden administration, continuing Mr. Trump’s first term, has led to 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 increased to $670 billion by 2023, although the pace slowed somewhat in the first nine months of last year.
“China is making the 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 briefing on Monday, Wang Lingjun, vice minister of the customs administration, dismissed such criticism. “It’s basically protectionism to counter China’s development,” he said.
China has not had a trade deficit since 1993. Its trade surplus in 2024 surpasses previous records when adjusted for inflation. Japan’s surplus, for example, reached its peak in 1993 at 96 billion dollars. That’s $185 billion in today’s dollars, or less than a fifth of China’s surplus last year.
Germany ran huge trade surpluses in the years following the European financial crisis a decade ago. But its surplus peaked in 2017 at $326 billion in today’s money.
The trade surplus of Japan and Germany reached about 1 percent of the economic output of the rest of the world. China’s trade surplus is double that measure, said Brad Setser, a senior fellow at the Council on Foreign Relations.
“As of 2021, China has largely turned back to exports — and its export growth is increasingly coming at the expense of other manufacturing economies around the world,” he said.
The United States ran constant trade surpluses from 1870 to 1970, according to researchers at the Federal Reserve Bank of St. Louis. 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 rifles to cars and washing machines. The US postwar trade surplus peaked at $12 billion in 1947, which is about $130 billion in today’s dollars. But because the rest of the world’s output was severely reduced that year, the U.S. trade surplus was about 4 percent of the global economy. This is a level that China has not yet reached.
The expansion of China’s trade surplus accounted for up to half of the country’s overall economic growth last year. Investments in new factories for export accounted for most 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 US, Japan, Germany, South Korea and Britain combined.
China has increased its exports with huge investments in education, factories and infrastructure, while maintaining fairly high tariffs and other barriers to imports. Universities produce more graduates each year in engineering and related subjects than the total number of graduates from all majors of American colleges and universities.
The question is whether China can maintain its lead if other countries raise tariffs. However, many importers believe that China is still the most competitive place to buy goods.
Eric Poses, owner and CEO of All Things Equal, a Miami Beach company that invents and distributes board and electronic board games, uses suppliers in Shanghai. It costs twice as much to print board games in the United States, while the United States doesn’t even produce much of the electronics needed for board games.
“I wish I could do it here cost-effectively, but it’s just not possible,” he said.
