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THE BOTTOM LINE

Excess savings are driving the new ‘China shock’

While subsidies direct increasing exports towards favoured sectors, they do not cause the surge

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    • So long as China saves more than it can profitably invest at home, the surplus will appear in foreign markets.
    • So long as China saves more than it can profitably invest at home, the surplus will appear in foreign markets. PHOTO: REUTERS

    Daniel Gros

    Published Wed, Aug 12, 2026 · 06:00 PM

    [BEIJING] The first China shock followed China’s entry to the world trading system.

    This was when the mobilisation of its massive pool of low-cost labour, combined with heavy investment from abroad, caused global manufacturing capacity to shift decisively towards the country.

    The new China shock is different. It is rooted in domestic technological upgrading and amplified by weak domestic demand.

    ChinaChina economyInternational tradesavingsThe Bottom Line

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