Correcting trade imbalance through cooperation

Geopolitical tensions are rising, with the United States and some other Western countries criticizing China for its rising trade surplus against other countries and its so-called industrial overcapacity. These issues are but snapshots of the broader structural challenges facing the global economy.

Amid the sluggish global economic recovery, uneven technological innovation and supply chain disruptions, countries across the world face formidable challenges. Now more than ever, collaboration is essential. Rather than provoking confrontation, countries need to work together to resolve their differences and encourage positive competition that leads to shared prosperity.

The road to economic recovery is uneven across countries because every economy grows at a different pace. This has created trade imbalances. During the COVID-19 pandemic, for example, many countries scaled up production to stabilize their economies, resulting in extra capacity and trade imbalances, which take time to correct. China scaled up its production in the manufacturing sector to meet the global demand during the pandemic, which caused its current account surplus as a percentage of GDP to rise to 2.0 percent in 2021. But with economies across the world recovering, the figure dropped to 1.4 percent in 2023, and it is continuing to decline, highlighting the market's self-correction capability.