China's $1.2T Export Glut Risks Global Economic Crisis — SkimNews
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- Michael Froman, former U.S. Trade Representative and Council on Foreign Relations president, warned in Foreign Affairs that "the world's ability to absorb Chinese overcapacity is approaching a breaking point."
- China posted a $1.2 trillion trade surplus in 2025 — the largest in recorded history — with the surplus growing more than 20% in early 2026 while the IMF estimated global GDP growth at just 3.1%.
- Chinese exporters charge as much as 30% less than rivals thanks to an undervalued currency and state subsidies, and nearly a third of China's industrial firms operate at a loss amid cutthroat price wars.
- Donald Trump's "Liberation Day" tariffs and new European Union trade barriers are both rising, and Froman predicted protectionism will "cut off Chinese manufacturers' market access."
- Federal Reserve economists and Apollo chief economist Torsten Slok separately flagged "China Shock 2.0," noting the export mix has shifted from labor-intensive goods to capital- and tech-intensive industries.
- Over the past six years, China's manufactured imports grew just $15 billion annually (inflation-adjusted) while exports surged more than $150 billion, leaving China with capacity for two-thirds of global car demand and over half of world steel, aluminum, and ship production.
- Froman predicted mass business failures, losses at state-owned banks on "zombie firms," and defaults in local government financing vehicles — and warned the U.S. would bear cleanup duties for a crisis "made in China."
Why it matters: If China's export machine stalls as foreign markets close off, commodity-exporting and developing economies dependent on Chinese raw-materials demand face cascading losses, while the U.S. — not Beijing — bears cleanup duties for a crisis Froman says is "made in China" but lands on American institutions.
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