The notion that China is flooding the world with excess industrial capacity is usually based on its massive surplus in goods trade, now standing at nearly US$1.2 trillion. That number is real, but treating it as proof of systemic overcapacity is not entirely correct.
Goods trade is only one slice of China’s external balance, and it is increasingly offset by large outflows such as import of services and investment income payments.
Moreover, China’s total current account surplus is US$657 billion…
Fears of overcapacity ignore China’s full balance of payments picture
