The surplus hidden by gold imports

I keep coming back to Brad Setser’s work on Chinese economic data because he shows how much interpretation sits behind an apparently simple metric. In his latest analysis, gold imports make China’s trade surplus look flatter than it is. The Council on Foreign Relations reports that China imported $146 billion of gold in the first half of 2026, with gold imports alone reaching about 1.5 percentage points of GDP in the second quarter. Treating that as ordinary evidence of domestic consumption would be misleading. Gold is better read as a separate financial and portfolio flow, so the underlying goods surplus remains much larger than the headline number suggests. (Setser’s analysis, CFR’s explanation)

That is close to the point Michael Pettis has made for years: the problem is the gap between what an economy produces and what its households can absorb, not simply whether exports are growing. I mostly write about AI systems, but trading economies fascinate me for the same reason neural networks do. Both are large systems in which local measurements can hide the structure producing them. China’s trade figures are easier to understand once we separate a gold surge from the goods that households and factories actually consume.