China's trade surplus driven by structural factors, not subsidies or undervalued exchange rate, economists say

China's trade surplus is not driven by subsidies or an undervalued exchange rate. Rather, it reflects multiple structural factors, including rising manufacturing competitiveness and growing import substitution, economists said at a forum in Beijing on Saturday. The shift also reflects the restructuring of global supply chains and the expanding role of Chinese companies in overseas markets.

At the 2026 Tsinghua PBCSF Chief Economists Forum, Wang Tao, senior research advisor at UBS Investment Bank, said China's trade surplus exceeded $1 trillion in 2025 and continues to rise. One reason is weak domestic demand, while another important factor is the continued strengthening of China's manufacturing capabilities. Products that China was previously unable to produce can now be manufactured domestically, often more efficiently, generating economies of scale.

At the same time, the trade surplus is not simply the result of increased exports; it also reflects import substitution. Advanced equipment and instruments that China previously had to import from other countries can now, in some cases, be produced domestically. In third-country markets, some developing countries that previously imported products from Europe can now import them from China instead, Wang said.

She also noted that China's trade surplus with emerging-market economies has accounted for an increasingly large share of its overall surplus over the past two decades. This is largely related to the restructuring of global supply chains. Many Chinese companies are "going global", which represents an extension of China's supply chain system into Asia and the broader global economy.

In summary, she said that China's trade surplus has multiple causes and is not the result of subsidies or an undervalued exchange rate.

"Whenever the issue of global economic imbalances is raised, many people tend to focus on China," Robin Xing, chief China economist at Morgan Stanley, said. "I believe that looking at it solely from this perspective is certainly one-sided. Global imbalances are a shared global problem."

In Xing's view, three factors may contribute to the continued evolution of global imbalances: path dependence in countries' macroeconomic policies, the amplifying effects of technological revolutions in various nations, and future geopolitical challenges.

"Therefore, addressing global economic imbalances requires a collective effort," he said.

Ju Jiandong, chair professor at Tsinghua University PBC School of Finance and director of the Center for International Finance and Economics Research at Tsinghua PBCSF, said global economic imbalances are a phenomenon arising from the international division of labor. China's manufacturing sector does not produce solely for China; it also produces for the rest of the world.

In theoretical terms, the phenomenon of the global division of labor itself does not need to be corrected. However, the United States and Europe feel that their manufacturing industries are under significant pressure, which is an issue viewed from a national-security perspective, Ju said.

Yao Yang, professor and dean of the Dishui Lake Advanced Finance Institute at Shanghai University of Finance and Economics, said China does not have excess capacity from a global perspective. In fact, the biggest problem facing the world remains development. Around 80 percent of the world's population still lives in difficult economic conditions and continues to need economic growth, Yao said.

"From the perspective of global development, China's productive capacity is far from excessive," Yao said. "This is particularly true as we confront climate change. China's current major export products are closely related to the global effort to combat climate change."

He added that China is providing productive capacity and technology to the world — and that technology is among the most advanced available.

Participants at the forum suggested that China should issue more central government bonds and invest in infrastructure. They also called for more funds to be directed toward social security in order to raise the incomes and confidence of low-income groups.

Justin Lin Yifu, dean of the Institute of New Structural Economics at Peking University, said investment is the principal means of addressing domestic and international economic imbalances. He suggested using investment to upgrade industries and increasing domestic infrastructure investment — particularly green infrastructure related to global climate change and the new types of infrastructure needed to seize the opportunities presented by the Fourth Industrial Revolution.

Another approach, Lin said, is for Chinese companies to "go global". China's export-oriented sectors can invest in countries participating in the Belt and Road Initiative.

Yu Yongding, an academician at the Chinese Academy of Social Sciences, said increasing infrastructure investment is an effective way for China to restart economic growth. He suggested that the government adopt more expansionary fiscal and monetary policies and move quickly to establish a modern infrastructure system, turning plans into projects as soon as possible, and projects into actual work on the ground.

"Opportunity waits for no one; a moment once lost will not return," Yu said. "Ten thousand years is too long; we must act now."