China’s surplus in manufactured goods net of commodity imports has continued to grow relative to the economic output of China’s trade partners, thanks in large part to China’s growth relative to the rest of the world. Even though the value of Chinese exports fell in 2023, this has had no impact on China’s overall balance because the amount of money spent on imports is down as well. The past few years have even seen a renewed surge in China’s surplus (properly measured) relative to China’s own GDP thanks to exceptionally weak growth in consumer spending and the sustained plunge in homebuilding. Federal spending—financed in large part by borrowing—has helped shore up private sector balance sheets and sustain demand, even as some spending elements have contained provisions that should put a floor on sales for American producers. This policy mix helps explain why China’s growing surplus has not attracted much ire, or even notice, in the U.S.
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