We are in the grips of what we are apparently calling “China Shock 2.0”: a new surge in China’s trading surplus with the rest of the world. The first one began in the late 1990s and gained steam after China’s accession to the World Trade Organization in 2001. Chinese exports to America rocketed while Chinese imports of American manufactures grew more modestly, hollowing out segments of American industry.

From 2007 to 2019, Chinese net exports fell sharply as a share of the economy, from nearly 9 per cent to under 1 per cent. Now the China Shock is back! China’s trade surplus is rocketing upward again, threatening rich economies. In 2025, this translated into exports in excess of imports to the tune of about $1.2tn, or roughly 1 per cent of global GDP.

All signs suggest that the 2026 surplus will match or exceed the 2025 performance. Part of the story is that Chinese domestic demand has flatlined since the property market crashed six years ago. Part is that Chinese President Xi Jinping prioritised a drive for self-sufficiency while pouring resources into critical manufacturing industries.

And part is a meaningful decline in the value of the yuan. Nineteen members of the G20 say yes, it would be good if someone did something about this. Chinese pique at their insistence on including language about the harmful effects of “non-market policies” on global imbalances scuttled a consensus communiqué at the meeting of G20 finance ministers a week ago.

On this point, the economists are arguing. Setser, an authority on imbalances, has spent the past two years banging the drum about China’s surplus and currency. In late July, he wrote a guest piece for The Economist, arguing: It will be difficult to limit the rise in China’s trade surplus, let alone bring the massive surplus down, without a stronger yuan.