China’s trade surplus is triggering global unease — and India could emerge a winner – Firstpost

China’s record trade surplus and relentless export surge are increasingly unsettling governments and manufacturers across the world, triggering a broader rethink of supply-chain dependence on Beijing — a shift that could create a rare long-term manufacturing opportunity for India.

The issue came into sharper focus this week at the Asia-Pacific Economic Cooperation (APEC) trade ministers’ meeting in Suzhou, China, where policymakers and trade officials debated rising trade imbalances, industrial overcapacity and the risks of excessive dependence on Chinese supply chains amid worsening geopolitical tensions. Concerns over cheap Chinese exports undercutting manufacturers in other economies and distorting global trade flows featured prominently in the discussions.

China’s export engine has continued to power ahead despite sluggish domestic consumption. The country ended 2025 with a record trade surplus of nearly $1.2 trillion, while exports in April this year surged 14.1 per cent year-on-year, driven partly by demand linked to artificial intelligence manufacturing and inventory stockpiling amid geopolitical uncertainty.

That export strength, however, is also fuelling anxiety across the United States, Europe and parts of Asia, where policymakers fear a flood of low-cost Chinese goods could hollow out local industries and deepen supply-chain vulnerabilities.

Global shift gathers pace

Against this backdrop, multinational firms are accelerating “China+1” strategies — diversifying production beyond China to countries such as India and Vietnam in an attempt to reduce geopolitical and operational risks.

The global mood is increasingly favouring manufacturing diversification, even if China’s dominance is unlikely to disappear anytime soon, said Vinod Kumar, Partner and Leader – Manufacturing at PwC India.

“The world may be uneasy about China’s dominance — but unease alone won’t redraw global supply chains. India’s window is open — not to replace China, but to steadily earn its place in global manufacturing,” Kumar said.

He noted that China still accounts for nearly 28–30 per cent of global manufacturing output compared to India’s sub-3 per cent share. However, India is steadily integrating into global value chains across electronics, chemicals, pharmaceuticals, defence and textiles.

“India’s manufacturing opportunity is increasingly credible — albeit gradual rather than disruptive,” Kumar added, pointing to growing policy momentum and rising investor confidence.

Louis Kuijs, Chief Economist Asia-Pacific at S&P Global Ratings, said geopolitical tensions between the US and China, alongside rising wages in China, are strengthening the case for supply-chain diversification.

“The countries that will benefit the most are those with good business climates and infrastructure, and reservoirs of untapped competitive labour that can work in manufacturing,” Kuijs said.

He added that India has already begun attracting greater interest from foreign firms, though persistent bottlenecks remain.

“Despite lingering problems with infrastructure, land acquisition, labour laws, and import restrictions, India could possibly become a significant beneficiary of investment in manufacturing, given its size and growth prospects,” he said.

Sectors likely to gain

Industry experts believe sectors such as electronics, pharmaceuticals, auto components, textiles, specialty chemicals and engineering goods are best positioned to benefit from the global realignment.

Vikash Thakur, Director – Entity Set up and Management at Nexdigm, said electronics manufacturing is emerging as one of the clearest beneficiaries due to policy incentives and strong domestic demand.

“Textiles and apparel are expected to benefit as buyers diversify sourcing away from China, especially in value-added segments,” he said, adding that India’s strengths in pharmaceuticals and engineering goods could further boost its attractiveness.

Analysts say the push towards supply-chain diversification is no longer a temporary response to geopolitical shocks but a structural shift reshaping global trade.

“The move towards supply-chain diversification appears to be structural and long-term in nature rather than a temporary realignment,” Thakur said. “Companies are now prioritising resilience, continuity and risk management alongside cost efficiency.”

The changing trade environment was also visible at the APEC gathering, where officials discussed supply-chain resilience amid disruptions linked to trade tensions and the Iran conflict. The meeting came shortly after G7 finance ministers called for action to tackle unsustainable trade imbalances.

India’s opportunity — and challenge

Yet experts caution that India’s opportunity is far from guaranteed.

Industry leaders say India still needs to address structural gaps in logistics, infrastructure, labour reforms and regulatory predictability to fully capitalise on the global manufacturing shift.

Suresh Bansal, founder of DCGPac, said global businesses are increasingly prioritising resilience and multi-country sourcing models over pure cost efficiency.

“The next decade presents a defining opportunity for India to position itself as a long-term manufacturing and supply-chain partner for global businesses,” Bansal said.

For India, the global reassessment of China’s manufacturing dominance may not deliver an overnight transformation. But economists say it has created one of the biggest openings in years for the country to emerge as a more central player in global supply chains — provided it can translate intent into execution.