A familiar refrain has returned to international debate: China is “causing” global economic imbalances. It is an easy argument, but not a convincing one. Earlier this month, the International Monetary Fund released a dedicated policy paper titled Understanding Global Imbalances, and held focused discussions on the widening of global imbalances and the underlying causes.
That timing matters. The IMF analysis shows that the world economy has become more imbalanced, and that the reason cannot be attributed to one country exporting too much. Recent data released by China’s General Administration of Customs reinforce this point.
China’s imports grew 19.6 percent year-on-year in the first quarter of 2026 while exports were up 11.9 percent. That imports grew faster than exports is an important detail.
It indicates that while global imbalances are widening, it’s doubtful that China is “causing” the problem.
The basic flaw in the “blame China” argument is that it takes a conceptual shortcut. Global imbalances cannot be reduced to a simple arithmetic of excess exports from one economy. They are rooted in the relationship between saving and investment, fiscal policy choices, financial structures and the broader organization of the international monetary system.
The IMF’s latest analysis makes precisely this point, stressing that domestic macroeconomic trajectories are the main drivers of external balances, while tariffs and trade restrictions generally have a marginal impact on current-account adjustment. That is why reducing the issue to “Chinese overcapacity” may be politically convenient, but it is economically insufficient.
Consider the oft-repeated claim that trade with China is the main reason for the industrial decline in advanced economies. Historical data do not support such a simple conclusion.
In the United States, manufacturing employment has been falling for decades. According to the US Bureau of Labor Statistics, manufacturing employment peaked at 19.6 million in June 1979 and had fallen to 12.8 million by June 2019, a decline of about 6.7 million.
This long-term trend reflects several structural shifts, including productivity gains, automation, evolving consumption and the steady growth of the service sector.
Trade shocks did affect some industries and regions, especially during the 2000s, but that did not create the problem. To say that deindustrialization was caused by imports is to mistake one contributing factor as the only reason for the decline.
That distinction matters because an incorrect diagnosis leads to bad policy. When domestic structural weaknesses are recast as purely external pressure, the real sources of fragility are left unaddressed. One of those weaknesses is inequality. Federal Reserve distributional data show that in the third quarter of 2025, the richest 1 percent of the US population owned 31.7 percent of the country’s total net worth. The next 9 percent owned another 36.4 percent, while the bottom half of the population owned just 2.5 percent.
OECD adult-skills data point in the same direction: in the 2023 Survey of Adult Skills, 28 percent of US adults scored at Level 1 or below in literacy. In a society with highly concentrated wealth and weak foundations, economic anxiety is bound to intensify. But this anxiety should not be mistaken for proof that China is causing the domestic imbalance.
Another problem in the current debate is the structure of the international system itself.
The world monetary order remains centered on the US dollar and is marked by deep asymmetries. The extraordinary depth of the US financial markets and the safe-asset status of US treasuries allow the country to sustain large external deficits for longer than most economies could.
This means that today’s imbalances are shaped not only by surplus countries, but also by a system that gives the principal deficit country exceptional capacity to absorb global savings and postpone adjustment. It is therefore misleading to frame global imbalances as a problem caused by China alone.
A third problem is the policy volatility in major deficit economies, especially in the US. The IMF’s 2026 Article IV consultation notes that the US fiscal deficit fell marginally to 5.9 percent of GDP in fiscal year 2025, while the current account deficit remained large at 3.7 percent of GDP. The Congressional Budget Office put the nominal federal deficit at $1.8 trillion in 2025.
Large fiscal and external deficits in the issuer of the world’s reserve currency, especially when combined with tariff shocks and policy unpredictability, are themselves a source of global instability.
Any discussion of global imbalances that overlooks this dimension is analytically incomplete from the outset.
A wider context is essential when assessing global imbalances. A more serious debate should begin with the premise that rebalancing is a shared task, but not a symmetrical one. China continues to strengthen domestic demand and deepen reform.
At the same time, major deficit economies, especially the US, need to confront the consequences of their fiscal decisions, financial incentives and policy volatility.
Until that happens, the world is likely to remain trapped in a cycle of growing imbalances, rising political blame and shrinking policy effectiveness.
The author is a research fellow in the Institute of American Studies at the Chinese Academy of Social Sciences.
The views don’t necessarily reflect those of China Daily.
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