Inside China's $878 Billion Trade Surplus
Inside China's $878 Billion Trade Surplus
Why *everything* is Made In China
As one of the world's largest economies, China has become a major player in global trade. Today we’re taking a deeper look at China’s colossal $878 billion trade surplus.
Brought to you by Refind- Get smarter every day with 5 article summaries | Wealthyhood- Get a free ETF worth up to £200 | Morning Brew- Become business savvy in just 5 minutes with bite-size news
Trade balances
A country’s trade balance represents the difference in its exports and imports of goods and services.
A trade surplus is a positive trade balance, where exports > imports.
A trade deficit is a negative trade balance, where imports > exports.
Let’s take a look at trade balances around the world.
China was the clear leader in trade in 2021, with a $463 billion trade surplus. Meanwhile, the USA has the largest trade deficit worldwide at -$845 billion. Furthermore, the USA’s trade deficit is over 10 times the size of the next-largest trade deficit, belonging to India. That’s a lot of debt!
China 🤝 everyone else
So whats behind China’s huge trade surplus, and the USA’s even huger trade deficit?
In 2022, China’s imports totalled $2.71 trillion, and exports $3.59 trillion, leaving it a hefty $878 billion trade surplus.
It’s no surprise that the USA is China’s largest customer, importing $582 billion worth of goods and services from China in 2022.
The chart below shows China’s other global partners for imports and exports.
Thank you to our friends at Visual Capitalist for the inspiration for this design!
Why is everything made in China?
China’s extensive infrastructure, including a robust supply chain and specialised labour force, make it an ideal location for producing goods quickly and efficiently. With a large population and low labour costs, China is the global epicentre of manufacturing, appealing to companies looking to cut costs and boost profits.
Additionally, the Chinese government has implemented policies to encourage foreign investment and manufacturing, such as tax incentives for companies that set up operations in the country.
Many large companies, including Apple and Tesla, rely heavily on China to support their manufacturing.
China and the European Union
The European Union (EU) is one of China's most significant trading partners.
China’s main exports to the EU comprise telecommunications equipment, machinery and electronic equipment.
On the other hand, China’s imports from the EU include motor vehicles and parts, electronic equipment and medications.
China's trade surplus with the EU has also been a subject of concern, due to the trade balance consistently skewing in China’s favour. To mitigate this, the EU and China negotiated the EU China comprehensive agreement on investment (CAI) in 2020, with the aim of creating a level playing field. Despite seven years in the making, the CAI was scrapped a mere 5 months following its negotiation.
Overall, as China’s trade surplus continues to boom, the country’s dominance in global manufacturing is showing no sign of slowing down.
Created by Shivani
This newsletter started free, and we aim to keep it free for as long as we can. However, any support is always much appreciated - feel free to buy us a coffee using the link below <3
among US "imports" are i-phones, nike shoes, etc. The "mark-up" happens in the Caymans, Ireland, etc. all the profits the "imports" describe, lie in Murican corporations, offshore. We cry.