A record trade surplus racked up by China is washing up around the world, as export earnings that once ended up in state coffers instead fund massive private purchases of overseas securities and business expansion abroad.
Rather than leaving most of last year’s $1.2 trillion windfall in the hands of the central bank, some two-thirds of the foreign assets sourced primarily from global trade ended up with companies, individuals and state lenders. That brings with it the risk of a sudden capital reversal that China doesn’t immediately control, especially in a world where the yuan is allowed to strengthen.
