China’s Trade Balance with the World

EconEye Admin

1 year ago

China’s exports rose 4.8% and imports fell 3.4% in May from a year earlier.—cnbc.com

The 1993 Trade Deficit with the World

The last time China maintained a trade deficit with the world was in 1993.—macrotrends.net

China’s Government Sector Balance in 2024

China had a budget deficit of 7.7% of GDP in 2024.—reuters.com

Answer the following questions to check your understanding of the story.

How did China’s balance of trade with the world change during the year ended May 2025?

China’s ___________.

a) trade surplus increased

b) trade deficit increased

c) trade surplus decreased

d) trade surplus changed to a trade deficit

Wrong! - In the year ended May 2025, China’s exports increased and its imports decreased.

What is the relationship between exports and imports when a trade surplus exists?

Correct! - A country has a trade surplus when it exports more than it imports. In the year ended May 2025, China’s exports increased and its imports decreased so the existing trade surplus increased.

Why does China have a trade surplus?

China has a trade surplus because ____________.

a) China uses a crawling peg exchange rate regime

b) China has a government budget deficit

c) China pays lower wage rates than most other countries

d) China saves more than it invests

Wrong! - We know that China has a trade surplus and a government budget deficit. What else do we know?

That's Right! - China’s trade balance equals the sum of its government sector balance and its private sector balance. Because China has a trade surplus and a government budget deficit, it must have a private sector surplus, so China saves more than it invests.

Share this: