China’s trade surplus: Signal of economic resilience, engineering stable global systems

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OPINION

By George Musiime

Last year, China registered a $1.2 trillion trade surplus, the largest in the history of any economy; a scenario that would have made President Trump right in using the favourite phrase “Like nothing anyone has seen before.” Surprisingly, the record surplus came at a time of unprecedented uncertainty and policy hostility that appeared destined to break global supply chains and the global economy. Indeed, last year was the pinnacle of Newman and Farrell’s hypothesis on the “Age of weaponised interdependence.”

With an administration acting more like a rogue state in Washington, Trump II showed no restraint in using control over critical nodes in global economic systems to hold the world at ransom. Meanwhile, despite criticism of China’s surplus as a vulnerability linked to overreliance on Chinese production, there’s more to it than can be heard in mainstream sources.

For instance, China’s focus on climate-conscious technology, EVs, clean energy, AI products and high-tech production systems, which are the technologies of the future. In addition, for the global south, the resulting reshoring and technological leakage mean diversified production sources, an increased role in the global economy, and, eventually, paving the way for a more stable economic system.

The tiny but significant blemish with the argument that China’s trade surplus is a result of over-subsidising exports to fix slowing domestic consumption is that it overlooks the country’s growing manufacturing capacity over the decades. China’s manufacturing sector has not only been transitioning from a low-cost, labour-intensive model to a more sophisticated one, specialising in new technology and high-end products.

In terms of volume, for example, China’s manufacturing output had by 2023 reached $4.6 trillio,n surpassing the next three largest manufacturing economies, namely, the US, Japan and Germany. The massive surplus is thus more about the expanding manufacturing capacity than it is about slowing domestic consumption. And whereas global consumption is not about to slow down, shifts towards new technology, and hi-tech production systems are strategies to counter pitfalls on the cost to the consumer side of the equation.

Moreover, the narrative of returning manufacturing jobs to some places also falls flat on its face when examined against China’s current trajectory. A case in point is the pivot from climate-conscious technology and energy sources back towards fossil fuels – ‘beautiful coal’ which might as well have cleared the way for the surplus, given a substantial portion of it came from Electric Vehicles, batteries and solar panels.

Conversely, a focus on high-tech production systems means that jobs being lost to Chinese people is a thing of the past. Any jobs being lost today will be to technology and the benefit of efficient production systems. 

Therefore, what is framed as a salient vulnerability associated with a ‘less visible but still central role’ of China could as well be the beginning of a new dynamic. What we noticed in 2025 was the moving of production processes to new countries in the global south, in a bid to route around the mounting geopolitical pressure. While this has been faulted for its reliance on Chinese intermediate inputs, technology and sometimes expertise, it also means diffusion of jobs, technology and skills to the new economies.

Ultimately, this reinforces the production capacity of destination economies in the global south and provides cushioning against similar shocks in the future. Resilience might be a result of system stability; however, such stability must be engineered by evenly distributing risk across multiple nodes as a safeguard against cascading failure starting in a single dominant node.

The events of the past year and the fallout from a global surge in economic nationalism and protectionism were a warning sign against the implications of concentrating risk in a single dominant hub. The tariff wars by Washington indeed highlighted how vulnerable global supply chains were under the old West-dominated configuration.  Additionally, in the event of the kind of shocks as instigated by the geopolitical strife seen through the tariff wars, the developing parts of the world risk taking the biggest blow. This is why China’s reshoring and diversification, albeit not breaking global dependence on Chinese manufacturing immediately, breaks ground for more stable supply chains in the long run. 

However, with globalisation on the rise and a more interconnected global system, a strong multilateral foundation becomes ever more important for its emphasis on mutual cooperation. Otherwise, unilateral action towards geostrategic outcomes that choke a single critical node could jeopardise or even crash the entire system. Obviously, China’s surplus is not a sign of a win in the geopolitical standoff primarily because we are only in the very initial stages of system readjustment.

Moreover, as bellicosity becomes internationalised, targeting grey-area nodes in the supply systems could eliminate the second country of origin option unless any tethering to the parent corporations is severed. We saw this last year with threats of 50% tariffs on nations allied with China and BRICS, and more recently, a 100% tariff on Canada over trade with China.

In the ultimate end, China’s Trade surplus may not be a direct win in the geo-economic contest, but it signals the initial stages of readjustments in the global system. As corporations move operations to other economies, the diffusion of technology, skills, and risk is dispersion that follow provide cushioning against failures of the kind the world was threatened with during the peak of last year’s tariff war. Reshoring and routing against pressure might have produced resilience that resulted into China’s surplus, but in the long term, the same could reduce reliance on a single dominant hub, enhancing economic stability.  

The writer is a Research Fellow, Development Watch Centre