BEIJING šC Allegations about China¡¯s manufacturing overcapacity have sparked heated discussions among policymakers. During her visit to China in April, U.S. Treasury Secretary Janet L. Yellen argued that ¡°when the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question,¡± adding that it was the same story a decade ago.
Yellen is partly correct: The Sino-American trade war has strengthened, not weakened, China¡¯s export competitiveness. In 2023, China accounted for about 14% of total global exports, up 1.3 percentage points from 2017 (before the conflict began). More striking still, China¡¯s trade surplus was around $823 billion in 2023, nearly double what it was in 2017.
Over a decade ago, China¡¯s trade surplus was largely the result of an undervalued yuan (CNY). Today¡¯s circumstances are somewhat similar. My research shows that in 2023, the CNY was 16% undervalued against the dollar, contributing to China¡¯s high exports and trade surplus.
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