Why China’s $1 trillion trade surplus isn’t all good news for its economy

Résumé détaillé

Booming exports mask a thriftiness among the Chinese that could undermine long-term growth.

China’s $1.04 trillion trade surplus in the first 10 months of the year is a testament to its mighty export engine.

It is also a sign of structural weaknesses that, left unchecked, threaten to derail China’s bid to join the ranks of the wealthiest nations.

While its status as the world’s factory helped it achieve a dramatic rise in living standards beginning in the late 1970s, China’s export-led economic model is facing diminishing returns.

Even as the AI boom drives its exports to record highs, the world’s second-largest economy suffers from chronically weak domestic demand.

Chinese consumers save far more than their peers elsewhere, with households typically putting away one-third or more of earnings.

The dynamic can be partly explained by China’s relatively weak social safety net, as well as cultural attitudes, an undervalued currency and a flailing real estate market.

China spends far less on social protection than most advanced economies.

Government spending on healthcare, pensions and welfare payments accounts for only about 10 percent of the country’s gross domestic product (GDP), far below the OECD average of about 23 percent.

With more money stowed away for a rainy day, Chinese households also spend less.

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