IT WILL BE difficult to limit the rise in China’s trade surplus, let alone bring the massive surplus down, without a stronger yuan. Stronger domestic demand growth on its own won’t do it. China’s industrial policies have squeezed imports out of the Chinese market; real imports of goods are up less than 5% in the past five years, while domestic demand is, if official statistics are to be believed, up just over 20%. And exports didn’t magically start to grow faster than global trade when China’s property bubble burst. Export outperformance really started in 2023, after the yuan fell significantly in both nominal and inflation-adjusted terms in the second half of 2022.
