China’s surging exports and faltering domestic demand are reshaping global trade flows, as European leaders convene in emergency talks and Asian partners brace for economic fallout. On Tuesday, the European Union’s statistics office reported that the bloc’s trade deficit with China hit a record €31.9 billion in April, with EU imports from China exceeding exports by roughly €1 billion per day . The imbalance has intensified calls for protective measures at the G7 summit, where finance ministers are expected to address what analysts are calling “China Shock 2.0.”

China’s export-driven growth model is straining under the weight of collapsing domestic consumption. Retail sales fell for the first time since the pandemic, while consumer spending has declined for the first time since Covid-19 lockdowns ended . The World Bank and IMF have warned that Beijing’s reliance on external markets risks deepening global imbalances, particularly as Chinese goods flood Europe’s manufacturing sectors. Slovakia’s Prime Minister Robert Fico, visiting New Delhi, praised India’s economic resilience, noting that India’s growth and digital transformation are outpacing many advanced economies .

The geopolitical ripple effects are spreading. In Jakarta, China issued a $50 billion warning to Indonesia over nickel production cuts, signaling Beijing’s willingness to deploy economic leverage to protect its supply chains for electric vehicles . Meanwhile, China and Myanmar’s leaders met in Beijing to deepen bilateral ties, underscoring Beijing’s strategic pivot toward resource-rich neighbors amid Western decoupling efforts .

India, meanwhile, is positioning itself as an alternative hub for global supply chains. Prime Minister Narendra Modi’s visit to Sweden this week highlights India’s push to strengthen ties with Europe as a counterbalance to China’s dominance . The two countries signed memoranda of understanding in defence, digital technology, counter-terrorism, and labour mobility, with Slovakia’s government hailing a “new era of partnership” .

Analysts warn that the divergence between China’s export surge and domestic demand slump could trigger further trade disputes. The EU is considering tariffs on Chinese electric vehicles and solar panels, while Beijing has threatened retaliatory measures. With global growth slowing and protectionist pressures rising, the coming months will test whether the world can absorb China’s economic rebalancing without deeper fragmentation.

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