Hello, audience, welcome to “Epoch Focus”.
In recent times, China’s latest foreign trade data has once again attracted global attention. On the surface, China’s overall exports rebounded in November, with trade breaking through $1 trillion for the first time. However, behind the export data, there are hidden crises such as a sharp drop in exports to the US, continued weak domestic demand, exacerbated steel overcapacity, and rapidly escalating trade tensions with Europe and the US.
At a time when China is heavily dumping industrial products onto the global market, French President Macron has made a rare public warning to Beijing. He stated that if China does not reduce its massive trade surplus with the EU, the EU will follow the US in raising tariffs on China. The latest research from Goldman Sachs and The Wall Street Journal also indicates that China’s export-oriented model is compressing growth space for other countries in a “negative correlation” manner, expected to trigger a larger global backlash.
According to data released by China’s customs on December 8th (Monday), in November, China’s exports to the US plummeted by 28.6% year-on-year. This marks the eighth consecutive month of double-digit decline in China’s exports to the US and the largest drop since August.
Despite agreements reached between Trump and China’s leader Xi Jinping during their meeting in South Korea on October 30th to reduce tariffs and take other measures, China’s exports to the US continued to decline significantly.
Reuters reports that the average tariff on Chinese goods in the US currently stands at 47.5%, well above the threshold of 40% that economists say would erode Chinese exporters’ profit margins.
Economists estimate that since Trump returned to the White House, China’s access to the US market has decreased, leading to a slowdown of around 2 percentage points in China’s export growth, equivalent to about 0.3% of GDP.
However, due to Chinese manufacturers shipping large quantities to other markets, China’s overall export performance still exceeds market expectations. In dollar terms, China’s total merchandise exports in November grew by 5.9% year-on-year, reversing the 1.1% decline in October and surpassing the average economist forecast of 3.8% growth, as per Reuters survey.
In November, China’s exports to the EU increased by 14.8% year-on-year, while exports to Australia surged by 35.8%. At the same time, goods imported from China by rapidly growing economies in Southeast Asia also increased by 8.2%. In the first 11 months of 2025, China’s trade surplus broke through the $1 trillion mark for the first time.
Since Trump’s victory in the November 2024 US election, Chinese enterprises have diversified their export markets to avoid US tariffs, strengthening trade ties with Southeast Asia and the EU. Chinese companies have also utilized their global presence to establish new production centers to gain low-tariff access.
In stark contrast to the export data, China’s imports appear relatively weak, with November imports increasing by only 1.9% year-on-year in dollar terms. The imbalance between domestic demand and foreign trade remains severe.
Despite reports from Chinese factory managers indicating some improvement in new export orders in November, they still remain in a contracted state. Data released by China’s National Bureau of Statistics on November 30th shows that China’s Purchasing Managers’ Index (PMI) for manufacturing in November increased slightly from 49.0 in October to 49.2, but still below the 50 mark indicating expansion. This shows that China’s factory activity has been declining for eight consecutive months, with new orders yet to rebound.
Steel production plays a crucial role in China’s manufacturing industry. Data from China’s National Bureau of Statistics indicates that China’s crude steel production in 2025 is expected to remain around 1 billion tons. This suggests that despite low profit margins and weak market conditions, steel production in China remains high. Soft domestic demand for steel is prompting Chinese steel mills to increase their overseas exports at low prices, putting immense pressure on steel enterprises in Europe, the US, and many Asian countries.
Edwin Basson, Secretary-General of the World Steel Association, recently told Bloomberg News that China’s steel industry has witnessed rapid expansion over the past two decades, with annual crude steel production hovering around 1 billion tons in recent years. However, with a long-term downturn in the real estate sector and weakening domestic demand, the Chinese steel industry is facing a new cycle of structural overcapacity.
Basson emphasized that the long-standing problem of excess capacity in China’s steel industry is becoming increasingly complicated to address, as it is deeply intertwined with China’s macro economy. Any direct policy to reduce steel output could have chain impacts on local economies, employment, and upstream raw material industries, without an immediate solution in sight.
The World Steel Association predicts that China’s demand for steel will continue to decline in 2025, with a decrease of around 2%, while the persistently weak domestic demand is driving China’s steel exports close to historical highs. In the first three quarters of this year, China’s steel exports increased by 9.2%, reaching 87.96 million tons. Against this backdrop, the low-priced competition in steel exports has sparked increasingly intense trade frictions.
In an interview published by the French newspaper Le Figaro on December 7th (Sunday), French President Macron revealed his warning to China during his visit. Macron stated that during his visit to China, he warned Beijing that if action is not taken to reduce China’s massive trade surplus with the EU, the EU will have to resort to imposing tough measures such as tariffs on China.
From December 3rd to 5th, Macron conducted a state visit to China, coinciding with the ongoing tensions in EU-China trade relations.
Macron told Le Figaro, “I tried to explain to the Chinese side that their (trade surplus with the EU) is unsustainable. If they do not take action, in the coming months, we in Europe will be forced to take tough measures. These measures can imitate the US approach, such as imposing tariffs on Chinese products.”
Macron also added that he had discussed this matter with the President of the European Commission, Ursula von der Leyen.
According to data released by the EU, there has been a long-standing trade deficit with China. In 2024, the EU had a trade deficit with China amounting to 305.8 billion euros (355.9 billion US dollars), with France having a trade deficit with China of around 47 billion euros in 2024.
The 27 EU member states cannot individually formulate trade policies towards China, including tariffs, as these are exercised uniformly by the European Commission. Macron acknowledges that reaching consensus within the EU regarding tariffs on China is not an easy task.
Macron has long advocated for the EU to adopt protectionist countermeasures to slow down the influx of Chinese goods into the European market, impacting European industries.
Macron also stated that in order to reduce the trade deficit with China, the EU needs to accept more direct investment from China. However, he also warned that Chinese companies should not be allowed to act like “predators” in Europe, nor should they pursue “hegemonic goals”. He urged the EU to protect its most vulnerable industries, such as the automotive sector while enhancing competitiveness.
On Friday, December 5th, The Wall Street Journal reported that the US has been the largest contributor to economic growth in other regions globally in 2025, far exceeding China’s contribution.
Despite the imposition of tariffs by the US, data shows that, up to now in 2025, US imports have grown by 10% year-on-year, while China’s imports have decreased by 3% year-on-year, despite China’s vocal opposition to trade protectionism.
Greg Ip, Chief Economics Commentator of The Wall Street Journal, wrote that over the past five years, China’s exports have surged while imports have stagnated, reflecting China’s increasing share of the global manufactured goods market.
“This reveals an alarming fact: Beijing is sacrificing the interests of other countries in favor of a ‘neighbor-draining’ growth model,” he wrote.
He also mentioned a recent report by Goldman Sachs economists. The report concludes that the economic interdependence between China and other regions of the world has turned negative (as one side grows, the other diminishes).
Goldman Sachs predicts that during the period of 2026 to 2029, China’s economic growth will be faster by 0.5 to 0.8 percentage points than previously expected, but this will lead to a decrease of 0.1 percentage point in economic growth in other regions of the world.
China’s growth model will pose increasing challenges to Europe, other East Asian industrial economies, Canada, and Mexico. A basic economic principle is that when two entities engage in trade, both benefit. However, this theory needs to be based on a free, rule-based world order.
Looking back at history, Germany, Japan, and South Korea also had export-oriented economies, but as members committed to international order, they were not afraid of economic interdependence and did not attempt to eliminate imports. As their industries moved towards the high end of the value chain, they allowed low-end manufacturing to shift to poorer countries.
Over twenty years after joining the World Trade Organization (WTO), China has become the world’s second-largest economy and largest exporter, leveraging international free trade. However, the Chinese Communist Party (CCP) adheres to a fundamentally different economic philosophy.
In 2020, Chinese leader Xi Jinping proposed a dual circulation system for China’s economy, emphasizing increased self-reliance in the international industrial chain while ensuring independence and self-sufficiency in domestic production.
Xi stressed that China must not abandon low-end manufacturing such as toys and clothing. Beijing also does not encourage Chinese companies investing abroad to transfer key technologies, such as production techniques for iPhones and batteries.
Many countries are dissatisfied with Beijing’s economic strategy as it squeezes their manufacturing and export opportunities, yet no country has found a solution.
China’s output of factories, retail sales, and industrial profits have hit new lows in over a year. As China’s domestic economy declines, the standard of living is decreasing across the board.
Data from China’s National Bureau of Statistics on November 14th showed that industrial production in October grew by 4.9% year-on-year, the lowest growth rate since August 2024. Retail sales, as an indicator of consumption, increased by 2.9% in October, also the lowest growth rate since August last year.
On November 27th, data from China’s National Bureau of Statistics showed that industrial enterprise profits in China in October decreased by 5.5% year-on-year, following increases of 21.6% and 20.4% in September and August respectively. The data indicates that state-owned enterprises’ profits for the first ten months remained stable compared to the same period last year, while private enterprises’ profit growth was only 1.9%, and foreign-funded enterprises’ profit growth was 3.5%.
China still heavily relies on exports and industrial production, with domestic consumption yet to become a stable growth engine. Meanwhile, high youth unemployment rates and continued sluggishness in the real estate market continue to dampen market sentiment.
Frederic Neumann, Chief Asia Economist at HSBC, stated, “The Chinese economy is facing pressure from all sides.”
He added, “Exports have supported economic growth for several quarters, but even if US import tariffs eventually turn out lower than expected, this growth momentum will be difficult to sustain into next year. This means that domestic demand will need to fill this void, but without further significant stimulus measures, the recent slowdown in investment and consumption growth may be challenging to reverse.”
Faced with high US tariff pressures, rising EU countermeasures, and a sluggish recovery in domestic demand, the Chinese economy is heading towards an increasingly narrow path. While maintaining growth through exports may be effective in the short term, it fails to address deeper structural issues such as overcapacity, a stagnant real estate market, weak consumption, among others. As external markets gradually close their doors and internal demand struggles to take over, how long can China’s heavily relied upon “export last line of defense” sustain?
Thank you for watching, until next time.