China’s exports exacerbate domestic imbalances and create problems for global competitors

Export expansion has traditionally been the main driver of China’s economic development, exerting a significant impact on the global economy. Since the early 2000s, a устойчивый trade surplus has formed in China’s economy, reaching a record $1.2 trillion in 2025. According to the UN, in 2024 China accounted for about 30% of global industrial production, and by 2030 this figure could rise to 45%.

Experts note the distinctive features of China’s current economic growth model, which is focused on stimulating external trade expansion by reducing production costs in export-oriented industries and by maintaining an undervalued yuan exchange rate against leading currencies. A consequence of China’s growth-stimulation model for the global economy has been a deepening imbalance between China’s rapidly growing supply of goods in foreign markets and weakening global demand in the world economy. 

In just the first two months of the current year, the trade balance surplus increased by 20%, while the IMF’s forecast for global economic growth in 2026 is 3.1%. There is an overcapacity of China’s production capabilities on the one hand, and at the same time an inability of the world’s economies to fully adapt to the growing expansion of Chinese exports on the other.

China is increasing production capacity and export potential especially rapidly in key sectors—solar energy, automobile and electric vehicle manufacturing—substantially exceeding global demand. China’s price dumping in foreign markets leads to a decline in the share of imports from the Group of Seven countries, including Germany as one of China’s main trading partners. In particular, over the period 2022–2025, exports of German cars to China fell by 66%, while the total volume of overseas sales of cars from China more than doubled, making China the world’s largest exporter of automobiles.

The total volume of goods exports from Germany to China decreased in 2025 by 9.3% compared with 2024 and by 23% compared with 2022. The market share of German automotive companies in China is shrinking and, conversely, China has become the world’s largest exporter of automobiles. The European Union’s response was the introduction   of anti-dumping duties of up to 35% on Chinese electric vehicles.  

As demand for Chinese products declines, losses among export-oriented Chinese enterprises are increasing. At present, 60% of the growth in China’s share of the global goods market is supported by subsidies, including through firms’ access to state financing. Excess production and a shortage of domestic and external demand lead to the fact that approximately one third of Chinese industrial enterprises are operating at a loss.  The authorities support loss-making enterprises in order to preserve jobs and tax revenues, while state banks roll over the debts of insolvent borrowers. State support, as well as a consistently undervalued yuan exchange rate, allow Chinese companies to set prices 30% lower than competitors from other countries.

Nevertheless, China’s political leadership, despite the costs associated with the unprofitability of a number of industrial manufacturing enterprises, defines the development of the real sector of the economy as a priority strategic objective. Under the influence of the West’s growing protectionism toward Chinese goods, the emphasis in China’s leadership policy is gradually shifting from external goods expansion to stimulating domestic demand. In 2025, China’s leadership adopted the 15th Five-Year Plan for 2026–2030, aimed at promoting domestic consumption, especially in rural areas, by strengthening the social protection system and creating incentives for the population to spend more and save less.

Author:  Professor, Doctor of Economics, Professor of the Department of World Economy and World Finance, Financial University under the Government of the Russian Federation Viktor Yakovlevich Pishchik.