China’s export-led model is nearing a global absorption limit, raising the risk that a stall in its trade machine could trigger a worldwide economic shock rather than just a domestic slowdown.
Nearly $1.2 trillion in 2025 trade surplus, more than 20% growth in early 2026, and output equal to 30% of global industry show exports are expanding far faster than world demand can absorb.
Subsidies, cheap state credit and local-government support keep unprofitable factories running—nearly 30% of industrial firms lose money—while Chinese producers can underprice foreign rivals by up to 30%.
Germany and the EU illustrate the backlash: German exports to China fell 9.3% in 2025, Chinese-made EVs already face EU duties of up to 35.3%, and broader local-content and supply-chain barriers are spreading.
A sharp China slowdown would hit commodity exporters and developing economies first, while the report argues only a coordinated U.S.-led push for gradual Chinese rebalancing could avert a crisis on the scale of 2008-09.