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China's enormous trade surplus is unsustainable for the global economy, according to Charlene Barshefsky, the former U.S. Trade Representative under President Bill Clinton. In an interview with Bloomberg Television, Barshefsky emphasized that China's reliance on exports and its focus on manufacturing at the expense of domestic consumption has led to an imbalanced economy that is increasingly problematic for the world.
She warned that the current surplus, which reached a record US$992 billion (RM4.4 trillion) in 2024, is "too big to accept." Barshefsky attributed this surplus to China's over-reliance on manufacturing investment and suppression of domestic demand. She stated that the world is facing a demand problem, not a supply problem, with China’s export-driven growth exacerbating this issue.
Barshefsky echoed calls from U.S. Treasury officials urging China to rebalance its economy and focus more on domestic consumption. However, despite China signaling a shift towards encouraging more domestic spending, meaningful policy changes have been slow, and reforms to the tax system and public services are challenging due to budget constraints and resistance from local governments.
The U.S. has also imposed new tariffs on Chinese goods, adding to the pressure on China's exports. Barshefsky suggested that addressing the root causes of China's trade imbalance, such as reforms to the social safety net and increased domestic demand, will be crucial for long-term economic stability.
In her view, solving trade imbalances involves more than just focusing on China; the U.S. also needs to address its fiscal deficit and work with international allies to bring manufacturing back home and improve competitiveness.
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