China’s exports have reached staggering levels. In 2025, the country shipped 26.99 trillion yuan (about $3.77 trillion) worth of goods abroad, a 6.1 percent increase over the previous year. In the first five months of 2026, exports surged another 11.8 percent, to 11.91 trillion yuan.
Behind these astonishing figures stands an equally astonishing figure: the state subsidy that makes them possible.
The Chinese regime currently pays out roughly 2 trillion yuan (about $280 billion) per year in export tax rebates. That fiscal subsidy amounts to more than 10 percent of China’s total annual government revenue.
To put it in perspective, the regime’s entire budget for social security and employment is about 4.4 trillion yuan. Exporters in China openly acknowledge that after all the toil of selling goods overseas, the tax rebate is where the profit comes from.
No normal economy operates this way. But the Chinese Communist Party (CCP) does not run a normal economy. Its willingness to export at any cost is driven by at least four strategic calculations—none of which has much to do with making money.
Employment Is the CCP’s Lifeline
By the regime’s own statistics, foreign trade directly employs tens of millions of Chinese workers and directly or indirectly sustains an estimated 150 million to 180 million jobs. Hundreds of millions of laborers are tied, one way or another, to the export supply chain and the industries upstream and downstream of it.
If China’s export enterprises were to fail, the consequences would not be limited to corporate bankruptcies. It would be mass unemployment among factory workers and rural migrant laborers—precisely the population the Party fears most when it becomes idle and angry.
Seen through the CCP’s eyes, subsidizing exports may be a money-losing business, but it purchases something the Party values above all else: social stability.
Stability is the regime’s overriding priority, and the price of unrest would far exceed the price of any subsidy.
Destroying Competitors Through Scale
Modern manufacturing—solar panels, lithium batteries, electric vehicles—lives or dies by economies of scale. When output doubles, research and production costs per unit plunge.
By dumping goods onto world markets with no regard for margins, Chinese industry spreads its research and development costs across colossal volumes. Once China’s supply chains achieve the world’s lowest costs and fastest pace of technological iteration, Western competitors—hemmed in by smaller markets and higher costs—are driven out of business. When the competitors are gone, the CCP is left with a monopoly over both technology and productive capacity.
This is not speculation. It is precisely the process that has gutted manufacturing across the United States and Europe over the past two decades.
Exchanging Cheap Goods for Dollars and Resources
The U.S. dollar remains the world’s ultimate claim on wealth. Although the yuan’s share of international settlement has grown, the purchase of crude oil, iron ore, soybeans, rare metals, and much of the world’s high-end equipment still requires dollars.
China is a resource-poor country on a per-capita basis. By flooding the world with cheap manufactured goods, the regime earns the hard currency it needs to buy and stockpile strategic raw materials—the inputs that keep the party-state’s machinery running.
A Safety Valve for Overcapacity
The CCP has built the world’s largest and most complete industrial system—far larger than its domestic market can absorb. If China’s output cannot be sold abroad, it backs up at home.
Severe overcapacity would trigger cutthroat price wars among domestic firms, dragging entire industries into losses and bankruptcy, and ultimately burying the banking system under bad loans. The endgame would be a systemic financial crisis.
Exports serve as an enormous release valve, discharging China’s surplus capacity onto the rest of the world before it can explode inside China itself.
An Unwinnable Contest for Private Firms
Western policymakers and economists have a blunt name for this model: dumping without regard to cost. When an American or European company competes with a Chinese counterpart, it is not really facing a company at all. It is facing an entire industry backstopped by the resources of a party-state. That is a contest no private firm can win on its own.
Nor is the strategy retreating as tariff walls rise in the United States and Europe. It is mutating. The regime is shifting from “selling goods at any cost,” powered by subsidies, to “building factories abroad at any cost,” powered by capital and technology—relocating production lines overseas in a new round of CCP-led globalization.
Whatever countermeasures the developed world adopts, CCP-backed enterprises are determined to keep expanding their global footprint.
It is worth recalling that before 2000, when international markets were largely closed to communist China, manufacturing in the free world flourished. Only after the CCP’s economy was ushered into the global trading system did the wave of factory closures sweep across the United States and Europe.
Today, exports have become a lifeline without which the Chinese economy cannot survive. The question for the free world is no longer whether the CCP’s export model distorts global trade. It is a question of whether the West is finally prepared to act.
Over the long term, the answer lies in building supply chains outside China, breaking free of dependence on Beijing altogether.
In the near term, the West could press China to let the yuan appreciate, eroding the profit margins that make its export flood possible in the first place. That would force Beijing to choose: pour in even more fiscal subsidies to keep exports afloat, or cede ground and let a share of them go—either way, handing American and European producers a price advantage they don’t currently have.