Recently, China's trillion-dollar trade surplus has sparked quite a bit of discussion. After the trade war resulted in this outcome, both the East and West were shocked. Only 19 countries have a GDP exceeding 1 trillion USD, and China's trade surplus in the first 11 months breaking through 1 trillion USD indeed seems exaggerated. While the US has increased tariffs, Chinese companies are expanding alternative markets and circumventing exports, maintaining strong growth momentum.

Macron stated, "The current imbalance that has accumulated today is unsustainable," and Goldman Sachs published an article titled "Beggar-Thy-Neighbor." The IMF is also calling on China to address trade imbalance issues. The world is paying close attention to this figure. But is this surplus really as terrifying as it appears on the surface?

Actually, no. More importantly, the problems caused by this surplus are not elsewhere in the world but are rooted in China itself.

Let's look at the data first. The trillion-dollar surplus refers to goods, but China has a service trade deficit of 180 billion USD. Some transactions within free trade zones between multinational corporations and domestic OEMs shouldn't really be counted as part of the surplus. Using the more professional term "current account surplus," it has only been about 650 billion USD over the past four quarters, which is somewhat smaller. But that’s not the main point; the number is still large.

What about the global situation? IMF statistics show that 45 economies have a surplus larger than the previous year, including 8 in the European Union. Europe's real concern shouldn't be trade imbalance— even if China's surplus were to zero out, European manufacturers would still find it difficult to compete with Chinese auto and electronics companies. This is an issue of industrial hollowing-out, unrelated to the size of the surplus.

China's imports are declining, and it is less willing to buy foreign goods. However, it remains quite interested in foreign assets. Buying bonds, issuing loans, acquiring equity, establishing overseas factories—these are essentially exchanging today’s goods for future goods. Trade is an exchange, but the exchange doesn't necessarily have to happen simultaneously.

China's historically strong savings tendency was indeed a problem. After the 2008 global financial crisis, overall demand was severely insufficient. At that time, China's surplus could indeed be criticized as "beggar-thy-neighbor," because net exports drained demand from other countries.

But now, things are different. Many major economies are experiencing high inflation, domestic spending is strong, and they maintain low unemployment, with some capacity to absorb China's excess output. Federal Reserve and other central banks still have room to cut interest rates, further boosting demand. Global demand is fundamentally not an issue.

So where is the problem? China is the only major economy with low inflation. Employment is tight, consumer sentiment is pessimistic, and some industries are sluggish. Central banks are cautious about cutting rates, and the government is reluctant to "take all necessary measures" to stimulate large-scale liquidity. China relies on unexpectedly strong exports to sustain growth, which is not a long-term solution.

Once the trade war spreads to Europe, and the global AI bubble bursts, foreign demand could waver. By then, China would need large-scale fiscal stimulus to revive domestic demand, but it might find itself having to restore consumer confidence amid a sluggish global economy. That is the real challenge.