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China's export shock is pushing the global economy to a breaking point, former trade official says
Fortune • • business
Key Points:
- Michael Froman, former U.S. Trade Representative, warns that China's export-driven growth model is nearing its limits, risking a global economic crisis as the world struggles to absorb Chinese overcapacity.
- China's trade surplus has expanded rapidly, with a $1.2 trillion surplus in 2025, outpacing global goods trade growth threefold, prompting rising protectionism from countries including the U.S. and the EU.
- Chinese companies benefit from an undervalued currency, state subsidies, and mandates, leading to excess production and price wars, but nearly a third of industrial firms operate at a loss, signaling an unsustainable export model.
- If China’s export-led growth falters, it could trigger widespread business failures, financial instability, and reduced demand for raw materials globally, severely impacting commodity exporters and developing economies.
- Despite acknowledging the need to rebalance its economy, China is unlikely to abandon its export strategy fully, and any resulting crisis would likely require the U.S. and its institutions to manage the global fallout.
