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One of the biggest hopes for vigorous, sustainable recoveries in the American and global economies is the widespread conviction that China will show real progress in shifting its growth strategy from one based on maximizing exports to one focused on expanding consumption at home. Recently, three sets of data have appeared making clear that, despite repeated balances by its government, such China rebalancing still remains much more hope than reality.

The first figures show that China’s chronic merchandise trade surplus hit an all-time record last year of $624.89 billion. That’s up from $380.20 billion in 2014 – a 64.36 percent jump. (These numbers come from my monitoring of China’s reported monthly trade figures.)  Since China’s 2015 economic expansion slowed to 6.90 percent – a 25-year low – the contribution to the country’s growth made by net exports by definition is on the rise.  And 2016 promises more of the same: China’s January merchandise trade surplus hit another new all-time monthly high of $63.35 billion.   

China’s broader international surplus – in its current account – is on the rise as well. It surged by no less than 33 percent on year in 2015, to just over $293 billion. More important, as a share of China’s economy, it hit 2.70 percent – the highest level since 2010. It’s true that this surplus compared with the Chinese gross domestic product is far from its pre-financial crisis levels. But it’s also true that global growth is much weaker as well.

Finally, this morning, the European Chamber of Commerce in Beijing has just released a report showing that, contrary to the Chinese government’s promises, industrial overcapacity is getting worse, not better. As a result, China keeps exporting this glut – which the Chamber reminds is the inevitable consequence of Chinese government policies – at artificially low prices.  Therefore, jobs and valuable output keep being taken from China’s trade partners for reasons have nothing to do with free markets, global deflationary forces keep strengthening, and the world economy keeps building up the kinds of distortions that set the stage for the financial crisis and ensuing Great Recession.

According to the Chamber study, six of the eight major Chinese industries it examined not only continue producing far more than the domestic economy can consume: paper and paperboard, flat glass, steel, refining, aluminum, and cement. These levels of overcapacity have worsened in recent years – due largely to cheap credit from state controlled banks and support from local officials desperate to prevent China’s overall slowdown from boosting unemployment and political instability in their backyards.

The European Chamber has warned Chinese and European officials that China’s overcapacity “leads to job loss, which leads to protectionism in Europe” – warnings that sound credible given that they come from the continent’s powerful business lobby. At the same time, the absence of such warnings from America’s powerful business lobbies is likely sending another message entirely to Beijing: that China can remain on the overcapacity course, and keep avoiding economically and political risky real rebalancing, simply by dumping even more of its surplus production in a U.S. economy that can ill afford it, either.

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