Foreign Affairs: China Has Reached A Dangerous Threshold
- 16.08.2026, 15:24
This problem can no longer be hidden.
The Chinese economy has accumulated such a large amount of production capacity and export surpluses that Beijing’s traditional growth model is beginning to pose a threat not only to China itself but also to the global economy. If foreign demand cannot absorb Chinese goods at the same pace as before, the consequences could extend far beyond the country’s borders, writes Foreign Affairs.
In 2025, China’s trade surplus reached nearly $1.2 trillion, growing much faster than global merchandise trade. China already accounts for about 30% of global industrial production, and by 2030, this figure could approach 45%.
The problem is particularly pronounced in strategic sectors. Chinese companies are actively ramping up production of solar panels, electric vehicles, batteries, and other high-tech products. At the same time, domestic demand is growing much more slowly. As a result, companies are forced to seek buyers abroad, lowering prices and accepting minimal or even negative profits.
Nearly 30% of Chinese industrial enterprises are operating at a loss, and in the fastest-growing sectors, this figure reaches 34%. At the same time, state-owned banks and local authorities are propping up some of these unprofitable companies, allowing them to continue production.
The world is gradually losing its ability to absorb Chinese exports. Germany is already facing serious pressure on its manufacturing sector: its automobile exports to China fell by 66% from 2022 to 2025, while Chinese automobile exports more than doubled.
“China’s trade surplus could, in essence, collapse under its own weight,” the article states.
If countries continue to raise tariffs, local content requirements, and other trade barriers, China’s export model could face a sharp drop in demand. This would hit manufacturers, banks, and local budgets within the country.
But the consequences could be global. A decline in Chinese demand could send oil, copper, and iron ore prices plummeting, hurting Australia, Brazil, Chile, and a number of developing countries. A new crisis would also prove particularly challenging for governments around the world: their debt burdens are significantly higher today than they were before the 2008 crisis.
The best way to avoid such a scenario is a gradual rebalancing of the Chinese economy: boosting domestic consumption, cutting industrial subsidies, and strengthening the yuan. The U.S. and other major economies could play a key role in this process.
“The world cannot accept a China with a trillion-dollar trade surplus,” said U.S. Treasury Secretary Scott Bessent.
“Delaying action could make future restructuring much more painful. The next Chinese economic shock could turn into a global crisis on a scale comparable to the upheavals of 2008–2009,” the authors argue.