A February 2 piece in Qiushi, the Party’s theoretical journal, tells cadres that low prices are not necessarily a good thing. An external reader could reasonably ask why policy has moved so slowly, given that these risks are well understood. The answer is the trade-off. It seems the leadership is weighing reflation against financial stability, debt constraints, and an aversion to Western-style demand stimulus, while for a time treating the world’s absorption of ever-cheaper exports as a feature rather than a bug.
To avoid terms like overcapacity or deflation, Chinese officials often fall back on standard policy jargon. Last week, Wang Shijiang, deputy director at the Ministry of Industry, said of the photovoltaic sector that deep-seated supply-demand mismatches remain unresolved.
Anecdotally, U.S. media reported that Xi Jinping once dismissed advisers’ deflation worries with a line like “don’t people like it when things are cheaper?”, almost the opposite of Qiushi’s message.
This is the kind of pattern that makes macro economists raise an eyebrow. It does not automatically mean “textbook deflation”, but it is a signal many watchers will flag and keep a close eye on.
A recent European Central Bank analysis argues that China’s wider trade surplus is not primarily a one-off tariff-diversion story. Its core claim is that, since COVID-19, Chinese exports have run above trend while imports have stalled, creating what looks like a structural gap.
The paper links this to weak domestic demand, which has depressed import-intensive activity and household consumption, and to self-reliance policies that lowered import intensity. At the same time, falling export prices and non-price improvements helped Chinese firms expand exports.
The missing link is the vent-for-surplus mechanism: with weak sales at home and excess capacity, firms redirect output abroad, especially to the EU, where China’s exports rose by about 9% in yuan terms.
Not apples-to-apples, but directionally powerful: China’s goods surplus now absorbs roughly three times more of the rest of the world GDP than when Xi took office.
In October 2025, China issued a bundle of new export-control measures (licensing requirements) covering: super hard materials, selected rare-earth processing equipment and some rare-earth auxiliary materials, selected heavy rare earths and related products, plus certain lithium-ion batteries, cathode precursors and graphite anode-related items.
Then on 7 November 2025, China suspended implementation of that whole set until 10 November 2026.
Now, experts remind us that November 2026 is not that far.
On 4 February, the EU, the U.S., and Japan issued a joint statement pledging immediate steps to strengthen economic and national security by improving resilience in critical-minerals supply chains. The statement also commits the U.S. and EU to conclude, within 30 days, a memorandum of understanding covering mining, refining, stockpiling, and recycling.
In July 2023, China’s Ministry of Commerce shifted gallium and germanium from normal trade into a licensed export-control regime. The notice covered eight gallium categories and six germanium categories, and required exporters to submit technical documentation together with end-user and end-use declarations for approval. In practical terms, this gave China the ability to tighten or loosen gallium and germanium export flows at its discretion.
The chart reads less like a diversification story and more like a stock-and-demand cycle under a single-point constraint. Imports peak in 2021–22, then fall sharply in 2023, rebound in 2024, and ease again in 2025. That pattern fits firms building inventory, drawing it down, then topping up, rather than steadily replacing China with alternative sources. And because imports from China track almost the entire EU total each year, the key exposure has not changed.
The EU may be buying less gallium metal, but it is not yet buying it differently
Batteries are still discussed as industrial strategy, while rare earths are discussed as security. At this concentration level, trade experts would classify both as the same type of strategic vulnerability.
EU imports from China in this category surpassed €23 billion in 2025, reaching an all-time high.
The European Commission has opened an in-depth investigation to assess the activities of Goldwind, a Chinese wind turbine manufacturer, in the production and sale of wind turbines, as well as the provision of related services, within the EU. The Commission has preliminary concerns that Goldwind may have received foreign subsidies that could distort the EU internal market.
Repercussions are likely.
Exports to China by rail fell 4% in 2025, while imports fell 8%. Even so, the imbalance remains large: for every 1 kg the EU exports to China by rail, it imports about 5 kg from China.
SAFE’s data suggest China’s foreign IP bill moved to a higher plateau after Covid. IP imports averaged $29bn in 2015–2019, versus about $45bn in 2021–2025; 2025 was $47bn. Expressed in yuan, 2025 came in at around 333bn, roughly 4.9% below the 350bn yuan level Chinese policymakers mentioned in 2021
Most of that rise likely reflects a larger nominal GDP, but not only that. China also relied more on licensed technology and paid-for know-how, which tends to raise recurring royalty and licence payments. So it reads as both: a bigger economy and a slightly more IP-intensive one.
Outbound travel spending snapped back to $251bn in 2024. In 2025 it barely rose to $254bn, up only about 1.3%. That reads less like the start of a new boom and more like the end of the catch-up.
Put simply, 2025 brought spending back to pre-Covid territory, roughly around 2019 levels, but still below the 2016-2018 period. Many destinations hoped for “back to normal, then beyond”. The chart shows “back”, not “beyond”.
This also fits a change in behaviour. The number of trips may keep rising, but spend per trip stays restrained. More travellers, fewer splurges, shorter stays, closer destinations. The row with Japan did not help either.
More passports in motion, less spending.
China imported less gold via Switzerland in 2025, and total gold imports fell too. But the year also saw more two-way movement. Exports of bulk gold from China surged 73% in 2025, equivalent to more than one-fifth of its imports, almost all of it to Hong Kong, suggesting shifting routes and stock reshuffling alongside softer inflows.
For the curious reader, China Customs data show that China exported about 3.25 tonnes of gold to Iran in 2025.
China will host APEC in November 2026. Expect a flurry of preparatory visits to Beijing from May onwards. At the same time, China’s official rhetoric will stress an Asia-Pacific community of shared prosperity.
From a trade standpoint, the picture is different. For most of 2005–2020, China’s APEC surplus was essentially a U.S. surplus. China could run a large surplus with the U.S. while still running a deficit with the rest of APEC, including Japan, Korea, ASEAN and Australia. For two decades, the U.S. did the heavy lifting in China’s bloc-level balance.
The post-2021 shift matters. Once China runs a surplus not only with the U.S. but also with the rest of APEC, APEC looks less like a bilateral story and more like a regional absorption problem. More economies in the room have a direct stake in the imbalance.
The pattern is consistent with weaker import demand, more import substitution at home, and a stronger export push abroad since 2020. In short, the surplus broadening beyond the U.S. fits a world in which China’s adjustment leans more on external demand.
France plans to use its 2026 G7 presidency to advance a coordinated toolbox for global economic imbalances, with China’s large external surpluses as a central concern.
In our view, a new plurilateral instrument with automatic safeguard triggers is conceivable, but probably only outside WTO legal cover. If you wait for a WTO waiver, you may wait forever. In the current environment, the practical path is to avoid policies that require new WTO permission and instead operationalise measures that already fit within existing legal space, such as trade-defence rules, with automatic triggers to launch investigations.