China's $1.2 Trillion Surplus: A Silent Threat to Global Economic Stability?

• China's record $1.2 trillion trade surplus is now fueling large-scale private overseas investments, shifting from state reserves.
• Nearly two-thirds of last year's foreign assets were absorbed by companies, individuals, and state-linked lenders, not the central bank.
• Chinese non-official sector investors increased overseas asset holdings by over $1 trillion in the first three quarters of last year, doubling the decade's average.
• This led to a $535 billion surge in Chinese private investment in overseas securities, including US equities and European bonds.
• The shift marks a departure from China's centralized capital management, increasing global financial system's dependence on Chinese liquidity and posing risks of abrupt capital reversals.

Why It Matters: China's private capital outflow, driven by its massive trade surplus, poses new risks to global financial stability.