From the perspective of the global supply chain, why has China become a terrifying dual-headed monster of resource consumption and manufacturing?

The mystery of China’s trade surplus seems to stem from insufficient domestic demand, but in reality, it conceals a deeper layer of the global economic structure. To truly understand this phenomenon, it is helpful to start with China’s unique position in the global supply chain.

Resource Imports: The World’s Most Fearsome Buyer

Opening the import data of mineral resources reveals a shocking truth—China has become the largest raw material importer in human history.

Apart from gold and oil, China dominates almost all major minerals. In coal, despite sufficient domestic production, China imports 35% of the world’s coal; for strategic resources like iron ore, copper ore, and bauxite, import shares range between 60% and 90%. In the oil sector, about 80-90% of Venezuela and Iran’s oil production ultimately flows to China.

What does this scale of imports imply? It means the global mineral resource market is being supported by China’s demand. Just iron ore alone, a bulk commodity, has a trading volume exceeding hundreds of billions of dollars annually, but this is the limit—China’s procurement demand has already peaked, leaving no room for further growth.

Manufacturing Capacity: The Unmet Global Output

If resource imports make China a formidable buyer, then manufacturing capacity makes China a formidable seller.

Data from the photovoltaic industry best illustrates the issue: by 2025, global photovoltaic demand is about 630GW, with China accounting for 290GW, a market share of 46%. Considering China’s population is only one-sixth of the world, this already far exceeds what any other country should hold.

In many industries, China’s capacity accounts for over 50% of the global total, with some sectors reaching 90%. Take the automotive industry as an example: according to capacity plans of various manufacturers and cities, China can easily produce 100 million vehicles annually, far surpassing global demand. Such capacity scale is unimaginable in other countries.

“Insufficient Demand” Is a Fake Issue

Many analyses attribute China’s export surplus to insufficient domestic demand, leading to overcapacity being forced into exports. But this logic is flawed.

China’s capacity is designed for the global market; it cannot be absorbed domestically. No matter how domestic demand is stimulated, it cannot consume more than the global total demand. Therefore, the strength or weakness of internal demand has little to no impact on the export surplus.

Redefining the Trade Surplus Formula

China’s trade surplus can be explained with a simple, independent formula:

Trade Surplus = Global demand for Chinese manufactured goods - China’s raw material imports

The truth behind the 2025 surplus reaching $1.2 trillion is that raw material imports have hit a ceiling (reserve levels in various countries are already high, and import demand is saturated), while global demand for Chinese manufactured goods continues to rise (countries want to procure more from China).

This formula is unrelated to China’s internal demand strength. Regardless of how domestic demand fluctuates, global procurement of Chinese products will grow. As long as exports are profitable, manufacturing companies will prioritize fulfilling external orders—that’s the basic logic of market economics.

Future Space Remains

By 2025, a merchandise export surplus accounting for 1% of global GDP, exceeding $2 trillion and reaching 2% of global GDP, should not be difficult. This is not an internal demand issue but a natural result of global demand for Chinese goods.

It is worth acknowledging that some industries in China have expanded production beyond global demand, which indeed requires control and adjustment. But the fundamental issue is not insufficient domestic demand; rather, it is the enormous appetite of the global market for China’s efficient manufacturing. When China is both the world’s largest resource importer and the largest supplier of manufactured goods, a huge trade surplus becomes an inevitable outcome, not a sign of economic imbalance.