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China's trade surplus has exceeded $1 trillion for the first time in history (after 11 months, the PRC's surplus reached $1.076 trillion). The record was set immediately after some lessening of tensions in relations between Washington and Beijing — in October, the parties agreed on a one-year truce. Nevertheless, American tariffs against China are still in effect, and some types of products are subject to restrictive tariffs.
Where did Chinese export go?
China's trade with the USA has indeed collapsed, with exports to the US falling by 29% year-on-year. The decline in American volumes was more than mitigated by expansion in the Global South. Exports to ASEAN countries grew by 6–8%, to Latin America by more than 10%, and Africa showed explosive growth of 20–25%. In fact, China has created an alternative trade network that is less vulnerable to Washington's sanctions and tariff pressure.
However, a significant portion of record exports to Southeast Asia and Mexico are ‘classic’ detours. The goods are sent to Vietnam, Thailand or Malaysia, where they undergo minimal processing or simply have their labels changed, and are then sent to the United States or Europe as ‘non-Chinese’ products.
Today, electric vehicles, lithium batteries and solar panels are driving Chinese export growth. In these sectors, China's dominance is so strong at that it is literally impossible to find alternative suppliers at the moment. Over the past 11 months, Chinese chip exports have grown by a quarter compared to the same period last year. Morgan Stanley analysts predict that by 2030, China's share of global exports will grow to 16.5%.
Suffering Europe
The surprise in November's statistics was a sudden jump in exports from China to the European Union — by 14.8% in November (compared to a modest 0.9% in October).
At the same time, the PRC has successfully replaced imports of Western equipment. Whereas Beijing used to purchase machine tools, turbines and complex industrial equipment from Germany and France, it now manufactures them itself. European businesses realise that China does not want to complement European industry, but rather to compete with it. The growth of the Chinese economy now happens by taking away the share of the world market from Europeans.
Europe is currently experiencing a systemic industrial crisis, exacerbated by high energy prices and falling global demand. With this background, Chinese exports are perceived as an existential threat. Europe, which for decades has been teaching the world the principles of free trade, is forced to slide into protectionist practices in order to preserve its rapidly shrinking industry. This involves introducing localisation requirements (‘Made in Europe’) for strategic sectors, investigating cases of subsidy use and, of course, raising tariffs.
But China's response could be painful. Beijing has already demonstrated its willingness to use targeted strikes: the anti-dumping investigation against European brandy and dairy products was a transparent hint. If the EU closes its market to Chinese electric cars (by imposing tariffs of up to 40%), China could cut off oxygen to European farmers or, even worse, restrict supplies of critical raw materials for the green transition and the defence industry.
While European officials are negotiating the wording of the latest package of restrictions, Chinese container ships continue to explore ports in Africa, Latin America and the Middle East, redrawing the map of global trade to suit their own interests.