Viewing China's trade surplus as reality, not rivalry

Editor's note: Lin G. is a CGTN economic commentator. The article reflects the author's views and not necessarily those of CGTN.

In 2025, China's goods trade surplus surpassed $1 trillion for the first time – a historic landmark that has sparked lively debate across global media. Some Western outlets portray this surge as a threat, invoking terms like "dumping" or "overcapacity." Yet the reality is far more nuanced: the surplus is not the product of deliberate pressure on other economies, but rather the natural outcome of global supply chain adjustments and efficiency gains.

For Western policymakers and industry leaders, the question is not how to cast China as a rival, but how to recognize the structural realities it represents. By understanding the surplus as part of the global economic landscape, there is an opportunity to adjust strategies, explore complementarities, foster collaboration, and seek efficiency improvements that benefit both sides.

The trade surplus is not a deliberate outcome

China's record-high trade surplus is fundamentally the result of structural changes in the global industrial landscape. When multinational corporations reorganize supply chains based on cost, reliability, and scale, they are effectively "voting with their orders." China's advantages – particularly its efficiency and scale – remain difficult to replicate elsewhere. The surplus thus emerges from millions of decentralized decisions by global firms, rather than from any intentional policy by the Chinese government.

On the contrary, Chinese authorities have consistently emphasized that sustaining an excessively large surplus is not their goal. In fact, a persistent surplus creates a passive surplus in the capital account, translating into excessive government holdings of foreign assets. These holdings are exposed to global liquidity fluctuations, which can, in turn, constrain China's macroeconomic policy independence.

Recognizing this, China has actively promoted import expansion and upgrading. Initiatives such as the China International Import Expo, along with tariff reductions on a wide range of inputs, exemplify efforts to encourage diversified inbound flows and mitigate structural trade imbalances.

Efficiency anxiety in advanced economies

It is understandable that some advanced economies feel anxious. Countries that once dominated global manufacturing naturally experience concern as comparative advantage shifts rapidly. Yet while the concern is somehow legitimate, the policy responses often are not. Tariffs and broad industrial barriers, intended to protect domestic industry, fail to address the underlying reality of efficiency gaps.

Protectionist measures can temporarily delay the exposure of these gaps, but they do not restore competitiveness. Historical examples underscore this point: US tariffs on steel and aluminum failed to revive domestic capacity while raising costs for downstream industries. Recent waves of electric vehicle tariffs in certain Western countries illustrate a similar pattern—higher costs and limited choices for consumers, without generating the innovation incentives required for true industrial upgrading.

The deeper challenge is one of perspective. Some advanced economies remain anchored in a 20th-century view, assuming an inherently dominant position for Western manufacturing. Persisting with such assumptions inevitably misaligns policy with 21st-century industrial dynamics. Recognizing and adjusting to the new reality is the first step toward sustainable responses. Without this, advanced economies risk deploying measures that treat symptoms while undermining long-term competitiveness.

Room for complementarity in a non-zero-sum landscape

Contrary to zero-sum narratives, global industrial structure today is still largely complementary. Advanced economies retain clear advantages in design, branding, and fundamental research – capabilities that have not vanished despite the expansion of Chinese manufacturing. China, in turn, excels in scale and execution, forming a structure that complements rather than replaces high-end capabilities.

Ironically, certain Western policy choices have, in practice, worsened trade imbalances. Had advanced economies continued to sell high-end chips and sophisticated equipment to China as in the past, much of China's trade surplus could have been offset. Instead, restrictions on technology exports – intended to slow China's industrial rise – have pushed Chinese firms toward self-reliance and domestic innovation. By attempting to limit China's technological access, Western policymakers may inadvertently reduce their own firms' residual advantages, thereby ceding final strategic gains to competitors.

Currently, there is still a significant portion of the value added from China's exports that is captured by foreign multinationals operating within China. International companies such as Apple, Volkswagen, and Tesla are actually among the largest "exporters from China." This shows that much of the economic benefit of Chinese manufacturing is distributed across global supply chains. It also highlights that there remains substantial room for complementarity between China and Western economies, rather than a purely zero-sum competition.

Embracing Chinese partnership to enhance Western competitiveness

A more productive approach for advanced economies is to adopt a stance similar to that of China: opening windows for efficiency improvements, welcoming foreign investment, and embracing collaboration rather than viewing domestic industries as being displaced. Indeed, foreign-invested enterprises accounted for 29.3 percent of China's total trade in the first eleven months of 2025, highlighting how openness and collaboration underpin trade performance.

The idea is that, at the heart of competition, efficiency is paramount. In Western economies, where domestic firms face challenges in boosting productivity, integrating Chinese investment, technology, and operational expertise can provide a meaningful path to improvement. Drawing on long-term observation of Chinese entrepreneurs, it is clear that they are generally willing to invest overseas, although policy stability remains a key consideration. Such collaboration represents a rational strategy for Western firms to enhance efficiency while leveraging complementary strengths.

The most effective path is cooperation: joint technological development, shared production capacity, and selective adoption of Chinese technologies where beneficial. By recognizing this reality early and adjusting policies accordingly, Western manufacturers can extend their efficiency while preserving existing advantages. Delaying this adjustment risks falling behind, potentially facing obsolescence as illustrated by Kodak's camera business or Nokia's mobile phone business.

Acknowledging reality of strategic opportunity

Ultimately, rather than viewing China's trade surplus as a challenge to confront, it may be more constructive for advanced economies to regard it as a structural reality to understand. Recognizing this reality early opens the door to identifying complementarities and exploring avenues for collaboration. By embracing Chinese partnership thoughtfully, Western policymakers and firms can enhance their own efficiency while preserving long-term advantages, using the acknowledgement of change as a foundation for strategic adjustment.