The report calls on Beijing to boost household spending and reduce its dependence on exports to minimize “negative spillovers” on trading partners around the world. The findings are especially relevant for India, where local manufacturers continue to face stiff competition from cheap Chinese imports, despite efforts to impose anti-dumping duties and enforce quality controls. India’s goods trade deficit with China recently exceeded $100 billion, marking a record high.
China now contributes more than 60% of global goods trade surpluses, the report noted. Meanwhile, the share of domestic consumption in the Chinese economy—comprising household and government spending—dropped to less than half its pre-pandemic average in the second half of 2024.
Although a Chinese government white paper published in April attributed the trade imbalance with the US to structural factors in the American economy and natural global trade patterns, the US Treasury believes the imbalance reflects deeper issues in China’s policy approach.
The report also highlighted China’s lack of transparency in foreign exchange (forex) interventions. The People’s Bank of China (PBOC) does not publicly disclose its market activities, prompting the US Treasury to use indirect data sources. In 2024, China's state-owned banks reportedly conducted large-scale foreign exchange sales amounting to $165 billion, especially during a period of significant yuan depreciation in the second quarter.
The US Treasury concluded that the extent of these forex operations, the highest since the 2015–16 capital outflow crisis, may not be fully reflected in official data, raising concerns over the transparency of China's monetary policy mechanisms.