## The Deep Logic Behind Global Commodity Flows: Why China's Trade Surplus Continues to Rise

By 2025, China's merchandise trade surplus has reached $1.2 trillion. This figure does not reflect the traditional economic explanation of "insufficient domestic demand and excess capacity," but rather a completely different global business operation mechanism.

**Raw material imports have hit a ceiling, while global demand for Chinese manufacturing continues to rise**

To understand the true cause of the trade surplus, we must first look at the import side. As a super purchaser of global mineral resources, China's import share is astonishing: coal accounts for 35% of the global total, iron ore over 60%, copper ore about 70%, and rare earth products over 80%. Except for oil, which faces global competition, China is essentially the largest buyer of other bulk commodities.

This scale of imports has already reached an absolute peak. Oil production from countries like Venezuela and Iran flows mostly to China, leaving no room for growth. For industrial staples like iron ore, with an annual transaction volume exceeding hundreds of billions of dollars, imports are already saturated—despite China’s population accounting for one-sixth of the world, its industrial demand far exceeds what its population proportion should imply.

In contrast, the story on the export side is entirely different. Global demand for Chinese manufactured goods continues to rise and has not yet saturated. A typical example is the photovoltaic industry: in 2025, global PV demand is about 630GW, with China’s demand at 290GW, accounting for 46%. This means there is still a demand of 370GW elsewhere—an enormous and expanding market.

**Capacity scale exceeds global demand, but this is not an internal demand issue**

China’s manufacturing capacity is astonishing. Over half of the world’s industrial capacity is in China, with some industries reaching over 90%. Take automobiles as an example: based on capacity planning by companies and cities, China theoretically could produce 1 billion vehicles annually, surpassing global demand.

However, a common misconception needs clarification: this is not due to insufficient domestic demand. On the contrary, China’s capacity was originally designed to serve the global market. Regardless of domestic demand fluctuations, global purchasing of Chinese-made products continues to increase—because people want affordable, quality goods to improve their lives.

**The independent formula for the trade surplus: global demand minus raw material imports**

A simplified model can be established to understand this phenomenon:

**China’s merchandise trade surplus = global demand for Chinese manufacturing goods – China’s raw material imports**

In this formula, raw material imports have become a constant—ample reserves, no growth expected. Meanwhile, global demand for Chinese products is still on an upward trajectory. The result is a continuously expanding surplus.

It is important to note that this logic is completely independent of China’s internal demand. Producers, aiming for profit, will pursue exports regardless of whether domestic sales are profitable or not. Global purchasing power determines the right side of this equation, not the consumption willingness of Chinese households or enterprises.

**How "excessive" is a $2 trillion surplus?**

Currently, a $1.2 trillion surplus accounts for about 1% of global GDP, leaving room for doubling. Even if it rises to around 2% (about $2 trillion), it would not be unmanageable within the global economic structure. The real constraints are not policies or domestic demand but the actual purchasing power of the global market for Chinese goods—this upper limit has not yet been reached.

This logic indicates that China’s trade position stems from the reality of global industrial division: raw material suppliers provide resources, and China transforms them into goods needed worldwide. The existence of a surplus fundamentally reflects the inevitable result of this role arrangement.