The consumption paradox: Rethinking global trade imbalances beyond China, by Abubakar Suleiman

Rather than expecting China to adopt unsustainable Western consumption patterns, perhaps the more pressing challenge is transitioning all economies — including the United States — toward more sustainable models of production and consumption that can actually function within planetary boundaries… The solution to the deficit lies in more self-reflection and less preaching. We need to ask not just how China can change its consumption patterns, but how the United States can develop a more sustainable economic model that doesn’t require perpetual growth in material consumption.

In the ongoing debate about global trade imbalances, a persistent narrative has emerged: China needs to consume more. This seemingly straightforward solution to America’s escalating trade deficits with China has become conventional wisdom among many economists and policymakers. The argument suggests that China’s domestic economy is not commensurate with its national output, and its export-oriented economy has become too successful for global stability.

But a closer examination of the data reveals a more complex and counterintuitive reality — one that challenges fundamental assumptions about global trade, consumption patterns, and environmental sustainability.

The Numbers Tell a Different Story

In 2024, China’s net exports (exports minus imports) contributed approximately 2.1 per cent to its Gross Domestic Product (GDP), while the United States had a net deficit of 3.1 per cent. These figures might seem to support the conventional narrative until we consider Germany, which posted net exports of roughly 5.6 per cent of GDP — far higher than China — despite a GDP per capita of $72,599, which is almost three times China’s.

Even more striking is China’s export to GDP ratio, which stands at 18.4 per cent, while Germany’s towers at 43.4 per cent and the United States sits at 10.8 per cent. By these metrics, Germany’s economy is significantly more export-dependent than China’s, yet it rarely faces the same level of criticism in trade discussions.

The focus on China’s export model, while ignoring Germany’s much higher export dependency, reveals that trade tensions are not simply about numbers. They reflect deeper geopolitical and structural concerns that go beyond simple trade statistics.

The Silent Comparison: Why Germany Gets a Pass

Why does China’s export model draw such scrutiny, while Germany’s more export-intensive economy escapes similar criticism? Several factors explain this paradox.

First is scale. Despite Germany’s higher export-to-GDP ratio, China’s absolute export volume — approximately $3.58 trillion in 2024, compared to Germany’s $1.7 trillion — creates larger market disruptions globally.

Second is speed. Germany developed its export prowess gradually over decades, allowing global markets to adapt, while China’s rapid rise as an export powerhouse has given the world economy less time to adjust.

Third is composition. Germany focuses on specific high-value niches like luxury automobiles, specialised machinery, and chemicals, while China competes across a broader spectrum of industries, affecting more sectors in importing countries.

Perhaps most significantly, geopolitical positioning colours perceptions of similar economic behaviours. As a Western democracy integrated into transatlantic institutions, Germany’s export success is viewed through a different lens than China’s.

When we talk about trade imbalances, we’re never just talking about trade. We’re talking about systems of governance, historical relationships, and perceptions of fairness that go far beyond the numbers.

The Consumption Prescription: More of What?

If the solution is for China to consume more, the logical question follows: More of what? A detailed examination of China’s consumption patterns across key sectors reveals a surprising picture.

Housing: China already has a 96 per cent home ownership rate and a list of highly publicised “ghost cities.” There’s little logic to building more homes in a country where 22 per cent of the housing stock is already vacant and 70 per cent of urban household assets are tied up in real estate.

Education: China produces between 30 per cent to 35 per cent of global STEM graduates, far exceeding its 17 per cent share of the world population. It already has a 95.7 per cent completion rate for its nine-year compulsory education and over 60 per cent higher education enrolment, consistently allocating over 4 per cent of its annual budget to education (compared to the US at 5.59 per cent of GDP in 2024).

Healthcare: Studies indicate a mean efficiency score of 0.7672 for China’s healthcare system, with a life expectancy of 79 years — higher than the United States at 78.4 years in 2023. China achieves these outcomes with significantly lower per capita healthcare spending than America.

Transportation: By the end of 2024, China’s high-speed rail network reached 48,000 kilometres, accounting for approximately 30 per cent of the country’s total railway operating mileage of 162,000 kilometres — by far the most extensive transport infrastructure in human history. Additionally, Chinese consumers purchased 31.44 million cars in 2024, twice as many as Americans at 15.85 million.

Consumer Goods: China is already the largest consumer of most electronic goods, with 285 million smartphones sold in 2024, accounting for 23 per cent of the global market.

The data simply doesn’t support the narrative that Chinese consumers are significantly under-consuming. In many categories, Chinese consumption already exceeds American consumption in absolute terms, though not on a per capita basis.

The Unsustainable Benchmark

Perhaps the most troubling aspect of the “China should consume more” prescription is its environmental implications. Multiple studies indicate that if everyone on earth consumed at American levels, we would need between four to five earths to sustain that consumption.

The American lifestyle requires disproportionate amounts of energy, water, land, and raw materials. The production and use of household goods and services are responsible for 60 per cent of global greenhouse gas emissions, with American per capita emissions among the highest in the world.

The impact of China increasing its household per capita energy consumption to the level of the US would be devastating to the climate. The same is true of food and cars. The world simply cannot support 1.4 billion people consuming like Americans.

This raises a profound question: Is China’s level of consumption really the problem, or is it the debt-fuelled and wasteful consumerism of the United States?

Cultural Factors and Historical Context

The Chinese have risen from a $2,000 per capita economy to over $12,000 in a remarkably short time. Economic history suggests there’s very little anyone can do to prevent this generation from being frugal — anyone who has lived a life of scarcity will be committed to saving.

There’s a profound cultural disconnect in expecting Chinese consumers who experienced or whose parents experienced genuine poverty to suddenly adopt American-style consumption patterns. Saving behaviours are deeply ingrained responses to historical experiences of scarcity and uncertainty.

Moreover, China’s consumption model prioritises collective infrastructure over individual consumption, representing a different but not necessarily lower consumption pattern. The country has invested heavily in public transportation, renewable energy, and urban infrastructure that benefits large segments of the population, rather than encouraging maximum individual consumption.

The Technology Dimension

If Chinese consumers are to increase consumption beyond their current levels, it would logically be in areas they don’t currently produce domestically — particularly advanced technology. Yet, China was a voracious consumer of Nvidia and other advanced chips until embargoes by the United States put an end to that.

Similarly, China’s demand for foreign travel and education has been rising but is now likely to stall or even fall rapidly, with emerging trade restrictions. The paradox is that the world desires to see China consume more, but not necessarily the things they really want, and there are few countries that can supply everything else China requires competitively.

There’s a fundamental contradiction in Western trade policy toward China. On one hand, China is criticised for not consuming enough Western goods, while on the other hand, increasing restrictions limit what China can purchase from the West.

As global trade tensions continue to simmer, China has an opportunity to transform the global economic landscape in a way that addresses trade imbalances, while promoting sustainable development. The Belt and Road Initiative (BRI) offers a framework for this transformation, but it must evolve to its conclusive end… China should accelerate the outsourcing of its low-end manufacturing jobs to emerging economies in Africa and South America.

Rethinking Solutions

The solution to US trade deficits cannot be to “Americanise” Chinese consumers. Not only is that culturally insensitive, but it is also environmentally unsustainable. The world cannot support eight billion American lifestyles.

A more balanced approach would recognise that trade “imbalances” measured in monetary terms may not reflect the more important resource and environmental balances. It would acknowledge that different consumption patterns reflect different cultural values, historical experiences, and development stages.

Most importantly, it would recognise that addressing global sustainability requires fundamental rethinking of consumption patterns in both developed and developing economies. Rather than expecting China to adopt unsustainable Western consumption patterns, perhaps the more pressing challenge is transitioning all economies — including the United States — toward more sustainable models of production and consumption that can actually function within planetary boundaries.

The solution to the deficit lies in more self-reflection and less preaching. We need to ask not just how China can change its consumption patterns, but how the United States can develop a more sustainable economic model that doesn’t require perpetual growth in material consumption.

A Path Forward: Completing the Belt and Road Vision

As global trade tensions continue to simmer, China has an opportunity to transform the global economic landscape in a way that addresses trade imbalances, while promoting sustainable development. The Belt and Road Initiative (BRI) offers a framework for this transformation, but it must evolve to its conclusive end.

China should accelerate the outsourcing of its low-end manufacturing jobs to emerging economies in Africa and South America. By relocating or establishing manufacturing facilities closer to both raw materials and consumers, China can export more capital and less goods. This strategic shift would create a more balanced global economic ecosystem, while addressing several critical challenges:

First, it would help moderate China’s trade surpluses by transforming China from a goods exporter to a capital and technology exporter. Rather than shipping finished products across oceans, China would export machinery, expertise, and investment to facilities in developing regions.

Second, it would create fresh demand for Chinese machinery, technology, and management expertise, supporting China’s transition to higher-value industries, while opening new markets for its advanced products.

Third, it would accelerate industrialisation in emerging economies, creating jobs and economic growth in regions that desperately need development. This would expand the global middle class, creating new consumers for both Chinese and Western products.

Fourth, it would reduce the environmental impact of global trade by shortening supply chains and placing production closer to both resources and end markets, reducing transportation emissions and improving resource efficiency.

This approach represents a more sophisticated evolution of China’s economic development model — one that recognises the limitations of export-led growth, while leveraging China’s accumulated capital, technology, and expertise to create a more balanced global economy.

Rather than simply consuming more, China can lead the way in creating a more sustainable and equitable global economic order by completing the vision of the Belt and Road Initiative. This would not only address trade imbalances but would do so in a way that promotes global development and environmental sustainability — a true win-win solution for China and the world.

Abubakar Suleiman is an economist and a banker with over 25 years experience in consulting and financial services.