China’s Premier Li downplays global trade disruption fears amid surge in exports

[DALIAN, China] Chinese Premier Li Qiang played down worries about the disruption wrought by his country’s surging exports on the global economy, instead championing the benefits provided to the world by China’s development.

While China once offered global markets the benefits of low-cost production, now it “provides the world with increasing dividends of innovation through technological progress and industrial upgrading”, Premier Li said on Wednesday (Jun 24).

Instead of seeing it as another case of China unleashing a surge of cheap exports abroad – a phenomenon that has come to be called China Shock 2.0 – “it should be China Opportunity 2.0”, Li said during a keynote address at the World Economic Forum in the Chinese city of Dalian.

China’s widening trade surplus with major partners has come under increased scrutiny in recent months as policymakers around the world weigh fresh measures to counter a flood of exports.

China has increasingly relied on manufacturing and exports for growth and saw its trade surplus grow to a record US$1.2 trillion last year. The competitiveness of its products, which some trade partners have attributed to unfair government subsidies, has hollowed out local industries in other markets.

Some economists and politicians have grown alarmed about the impact of the second China shock on global trade, after an initial wave that some analysts estimate claimed millions of jobs between 1999 and 2011.

Li pushed back against claims that state support is behind China’s dominance, joking that the government does not have enough money for so many subsidies. Rather, he argued that hard work, a large market and strong supply chains make Chinese goods more competitive globally.

“China has a complete industrial system and a vast market space,” he said. “Any niche product can become a big business and a big industry in our huge market of 1.4 billion people.”

The premier singled out Huawei Technologies as an example of the many Chinese companies that have continued to move forward and achieve breakthroughs despite “external suppression” – referring to sanctions and export controls from trading partners such as the US.

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Looking ahead, any escalation in trade tensions would compound risks for Beijing at a time when the domestic economy is showing renewed signs of strain. Data released last week showed consumer spending and investment both fell to levels unseen since the pandemic.

The figures highlight persistent structural weaknesses, even as strong exports and an easing in geopolitical tensions tied to the war in Iran provide a buffer for growth.

Economists have long warned that China’s growth model remains overly reliant on exports and investment, urging policymakers to bolster household incomes and the social safety net to stimulate domestic consumption and achieve a more balanced expansion.

German Chancellor Friedrich Merz last week called for international talks on exchange rates as part of the EU’s response to its deepening trade deficit with China. Without referring directly to the Asian nation, Merz said that the bloc was competing with countries whose currencies may be undervalued by as much as 30 per cent.

Trading partners and global banks have argued that China’s currency is significantly undervalued given its export strength and external surplus. BLOOMBERG