IMF Warns Global Economic Imbalances Are Widening Again as China’s Surplus Expands

Global current account imbalances widened further in 2025, marking a renewed reversal of the narrowing trend that followed the global financial crisis, according to the International Monetary Fund’s latest External Sector Report.

The IMF’s 2026 assessment, released on July 30, examines the external positions of 30 of the world’s largest economies using 2025 data. It finds that the gap between countries running large external surpluses and those recording substantial deficits has become wider again, raising concerns about uneven growth and potential financial vulnerabilities.

China Emerges as the Main Driver

China was the most important contributor to the latest increase.

According to the IMF, China’s current account surplus expanded by approximately $300 billion in 2025, the largest annual widening in absolute terms since at least 2000. The surplus reached roughly 0.6% of global GDP.

The IMF attributes part of this development to changes in China’s domestic economy. Investment has weakened, initially because of the slowdown in real estate and more recently because of softer investment in manufacturing and infrastructure.

At the same time, relatively high household saving continues to contribute to China’s external surplus. The IMF points to precautionary saving, including concerns related to social safety nets, as one factor supporting high domestic saving.

U.S. Deficit Remains the World’s Largest

The United States moved in the opposite direction, with its current account deficit narrowing by approximately $69 billion in 2025.

Despite the improvement, the American deficit remained the largest individual deficit in the world at around 0.9% of global GDP. The IMF notes that this deficit was still larger than the combined current account surpluses of China and the euro area.

The IMF links America’s persistent external deficit to relatively low national saving, with the government’s fiscal position remaining deeply in deficit.

Euro Area Also Sees Some Narrowing

The euro area’s external balance also moved toward a smaller imbalance in 2025.

The narrowing in the United States and euro area partly offset the sharp increase generated by China. Nevertheless, the overall global picture became more polarized as major surplus and deficit positions moved further apart.

This divergence matters because current account balances represent the broader relationship between a country’s saving, investment, trade in goods and services, and income flows with the rest of the world.

What Is a Current Account Balance?

A current account balance measures a country’s transactions with the rest of the world involving goods and services, income and current transfers.

A surplus generally means that a country is supplying more savings to the rest of the world than it is absorbing domestically. A deficit indicates the opposite: a country is relying more heavily on foreign financing.

A surplus or deficit is not automatically a problem. Countries can legitimately run external surpluses or deficits because of differences in demographics, investment opportunities, economic development or temporary economic conditions.

The IMF’s concern is focused particularly on large and persistent imbalances that exceed what economic fundamentals would justify.

Why Large Imbalances Can Become Risky

Persistent external imbalances can create vulnerabilities if they continue for long periods.

The IMF warns that excessive surpluses and deficits can contribute to inefficient allocation of resources, increase financial vulnerabilities and create the possibility of abrupt economic adjustments.

Large imbalances can also contribute to tensions between trading partners. Countries running persistent deficits may seek to reduce imports, while surplus economies may face pressure to stimulate domestic consumption and investment.

If adjustment happens suddenly, financial markets and economic growth could face additional pressure.

Trade Barriers Are Not a Simple Solution

The IMF’s analysis also challenges the idea that tariffs alone can reliably correct current account imbalances.

According to the Fund, trade barriers generally have limited and uncertain effects on overall current account positions because their impact can be offset by changes in domestic saving, investment, exchange rates and trade patterns.

The IMF says recent tariffs have contributed to a significant reconfiguration of international trade. U.S. imports from China have fallen sharply, while imports from other countries have increased. However, this change in trading partners does not necessarily eliminate the underlying current account imbalance.

Domestic Policies Hold the Key

The IMF argues that the most durable solution lies primarily in domestic economic policies rather than attempts to manipulate trade balances.

For countries with excessive deficits, stronger fiscal discipline can help increase national saving. For surplus economies, stronger domestic consumption and productive investment can help absorb more of the output generated at home.

The Fund says coordinated policy action would produce the strongest outcome for the global economy, although individual countries can still make meaningful progress by addressing their own domestic imbalances.

A Reversal of a Long-Term Trend

The latest development is particularly significant because global current account balances had narrowed following the global financial crisis.

The IMF’s 2026 report says the renewed widening represents a reversal of that earlier trend. The Fund also finds that excess current account balances have increased, with China and the United States making the largest contributions.

The development suggests that differences in domestic saving, investment, fiscal policy and economic demand are once again becoming more pronounced across major economies.

Key Global Statistics

• Data year analyzed: 2025
• Economies assessed by the IMF: 30
• Increase in China’s current account surplus: about $300 billion
• China’s surplus: about 0.6% of world GDP
• Change in U.S. current account deficit: narrowed by about $69 billion
• U.S. deficit: about 0.9% of global GDP
• Main drivers of excess global imbalances: China and the United States
• Global trend: Current account balances widened further in 2025

What Comes Next?

The IMF’s findings highlight a major challenge for the global economy: reducing external imbalances without damaging growth or triggering disruptive financial adjustments.

A coordinated approach could involve stronger domestic demand in surplus economies, greater fiscal discipline in deficit economies and policies that encourage productive investment.

The IMF argues that reducing imbalances is ultimately less about changing where goods are traded and more about addressing the underlying economic forces that determine how much countries save, invest and consume.

With global trade already being reshaped by tariffs, geopolitical tensions and changing supply chains, the renewed widening of current account balances adds another layer of uncertainty to the international economic outlook.

The central message from the IMF is clear: persistent global imbalances may not cause an immediate crisis, but allowing them to grow unchecked could make future economic adjustments more difficult and costly.