5/5
Huge trade surpluses, in other words, don't just reflect deep domestic imbalances and distortions within the surplus economy. They also create the reverse imbalances and distortions among their more open trade partners.

In a hyper-globalized world, it couldn't be otherwise.

4/5
that controls its trade and capital accounts creates the opposite external imbalances among its trade partners. These, in turn, must be accommodated by changes in their domestic economies. Distortions in one country automatically create distortions in its trade partners.

3/5
But they are rarely able to understand the implications. When each country's external economy is linked through nearly-frictionless trade and capital flows, each country's domestic economy is also linked through the same mechanism. A country with deep internal imbalances...

2/5
Most mainstream economists know that every country's internal imbalances are always perfectly consistent with its external imbalances, just as its external imbalances are always perfectly consistent with the external imbalances of its trade partners.

4/4
Because investment that went into solar panels had been directed there mainly because China could not allow overall investment to decline after the 2022 property collapse, reducing investment in solar panels just means it must rise elsewhere.
carnegieendowment.org/posts/2025/0...

3/4
It may sound like they're determined, and perhaps they are, but you don't solve a systemic problem with incremental changes. Excess manufacturing capacity in China is structural. Even if they can reduce it in solar panels, they can only do so by exacerbating it elsewhere.

2/4
The article cites the head of the industry association as saying “Don’t underestimate the determination behind the policy. We will fight to the end to steer the solar sector out of cutthroat competition.”

4/4
how achieving the latter will undermine the former, and what policies Beijing should implement to mitigate the cost. For now, Beijing is content to discuss the benefits of achieving balanced demand without acknowledging the costs.

3/4
What still isn't much discussed, at least publicly, is the structural relationship between China's supply-side strength and its demand-side weakness. For all the talk of boosting domestic demand, in other words, no one has really wanted to discuss...

2/4
It is by now widely recognized among academics and policy advisors that China's weak consumption is a function of a low household income share of GDP, and that the solution is to implement "demand-side measures to boost employment, income and confidence."

4/4
If those ratios continue to hold (and in fact by now they are probably higher) they suggest that while the overall market grew by 27.2% in the first nine months of 2025, sales by non-Chinese producers declined by 11-20% during that period.

3/4
The article does tell us that six of the top ten producers are Chinese, collectively accounting for 67.1% of total global production. Other sources suggest that all Chinese producers accounted for 75-80% of global production earlier this year.

2/4
The article doesn't provide enough data to figure out relative growth rates, but it is easy to calculate that the non-Chinese industry grew if Chinese producers accounted for less than 65% of the global total, and shrank if Chinese producers accounted for more.

10/10
As long as the US trade deficit continues to grow, in other words, if China's net exports to the US don't rise, that simply means that its net exports to the rest of the world will.

What always mattered to China was less the US deficit with China than the US deficit with the world.

9/10
The point is that bilateral imbalances are largely irrelevant. It is the growing US trade deficit, not the declining bilateral deficit with China, that determines the extent to which growing Chinese trade surpluses can be absorbed by the rest of the world.

8/10
Let's say Peruvian farmers export more fruit to American consumers. Given Peru's internal imbalances, these higher exports will allow higher overall imports, but not necessarily from the US. Peru can balance higher fruit exports to the US with higher EV imports from China.

7/10
Some analysts who understand this argue that this is mainly because goods produced in China are transshipped to the US via third countries, but in fact this only explains a part of it. The real reason is through income effects.

6/10
the US role of "absorber of last resort" of global excess saving) means that the role of the US economy is to absorb excess global production, wherever that production occurs, and whether or not that production is directed to US consumers.

5/10
That's because as long as the US trade deficit continues to rise, the trade surpluses of countries like China can continue to rise, whether trade between the two rises or declines. The global role of the US as "consumer of last resort" (which is better described as...