China exports like a trillion dollars of value more than it imports, and it seems to actively maintain this stance - Does it? And if so, why? My reductive ape-brain says if more goods are leaving your country than coming in, then other countries are accumulating actual goods, and your country is accumulating pieces of paper (or digital bits). Seems like a losing strategy.
Why not just make all the goods that your country wants (especially if you're an enormous country that can scale economies and has access to strategic materials like China) and then you'd have more stuff?
And how do currency exchange markets fit in? I thought exporting and importing and fluctuating value of currencies meant that it should all sort of 'balance out' in the end. Because prices of currencies change the value of export/import and consequently you'd eventually have a country that exports and imports the same value of goods.
Maybe I fundamentally misunderstand the purpose of trade. Or maybe I've been playing too much Victoria 3.
Countries obvously trade to acquire goods and services, but they also do so to gain currency, both to use for further trade and as part of reserve assets (in the central bank) which can used to intervene in currency markets to influence exchange rates. Countries, especially in highly developed, modern, technologically complex economies need to import huge amounts of raw materials and machinery which they can't produce themselves or at least not as cheaply as importing.
If you have a trade surplus in your current account (all trades of goods and services, income flows (e.g. wages to labor, rent, interest and profits to capital) and transfer payments), then that means that the total monetary value of your exports (and inward flows - injections - of income and transfers) excedes the total monetary value of imports (and outward income and transfer flows).
But the current account is just one part of the full account of all financial transactions, the Balance of Payments (BOP), i.e. the account of all flows of capital (monetary/financial or otherwise) between countries. There are also the capital account (flows of non-finacial assets, like when a family migrates and takes physical belonging with them or a firm or rich household moves furniture or machinery abroad) and the financial account (flows of financial assets). The financial account is more important than the capital account, being far larger in monetary terms and made all flows of financial assets (e.g. FDI, portfolio investment in equity and bonds etc., and so on). In theory, a balance of payments has to be balanced, so that, leaving aside the inevitable human errors in accounting, if there is a surplus in one part of the BOP, then there much be a surplus in the rest. The balance in the balance of payments (made up of (1) current account, (2) capital account and (3) financial account) is not what people are talking about when they speak of balancing trade deficits/surpluses, because, in theory, the BOP is always balanced.
To realise why consider this: in order for country-states to be willing to engage in long-term trade, there needs to be an expectation of some kind of parity in terms of what you are exchanging. If you have a surplus with a country, the total value of what you are giving them through trade, income and transfers is greater than the total value of what they are giving you. There must be a deficit therefore in the financial account, which means that the total value of the flows of financial assets into your economy from theirs is greater than that flow from your economy to their's.
Balancing your trade, meaning your current account, is a different issue. However, it is true that Neoclassical economists and Neoliberal ideologues often imply that, under liberalized free trade, current accounts should automatically balance, for the following reason:
Suppose country A (who uses currency A), have a deficit with country B (who uses currency B). B thus by definition has a surplus with A.
As this imbalance emerges, the demand for the currency B rises relative to before and to the demand for currency A, because their demand is derived from that for the goods and services sold nominally in those currencies, and when you buy goods from, say, the US, you pay in their currency, the dollar. Correspondly the demand for currency A would fall relative to B. So we would expect currency B to appreciate against currency A (so A's depreciates). But then B's exports to A would become more expensive and it's imports from A cheaper, and A's exports cheaper and it's imports from B more expensive. So the total exports from B to A would fall, it's imports from A would increase, i.e. A would export more B and import less than before. In quantity terms, this is an 'improvement' which would move the imbalance closer towards balance, so long as their is an imbalance, due to that imbalance's effect on the exchange rates. In brief, current account deficits are supposed to have a self-correcting tendency.
But this argument assumes a couple things: note that even that while the total value of B's exports fell if we only take into account their fall in quantity/volume, there was a positive effect on this total value due to appreciation of B's currency making exports more expensive; so they're exporting less, but getting more for each export. They are also importing more (negative effect on the CA), but at a lower price (positive effect). They're importing more, but paying less for each import. So the quantity effects on the CA balance is negative (i.e. decreases their surplus) for B, but the currency-monetary effect is positive (increases the surplus). The question is which of these outweights the other.
This is where neoclassical economics uses the idea of price elasticities, which tells you the proportion between a change in a price and the consequent change in the quantity demanded on the market. They use the Marshall-Lerner condition, which basically says that the trade of exports and imports is elastic overall (meaning that price changes cause proportionally bigger quantity changes). So if this condition applied, then B's surplus causes appreciations in B's currency, and the quantity changesn (which have a negative effect on their surplus)) are proportionally bigger than the price changes (which have a positive effect on their surplus), so it would decrease the surplus, bringing it closer to balance.
The argument here is symetrical for the deficit side of the equation.
It also assumes that the currencies can just appreciate/depreciate smoothly, i.e. it ignores exchange rate mechanisms, such as fixed or hybrid-fixed currencies countrols. It also ignores capital controls, e.g. on hot money flows between currencies, and the fact that countries A and B will often trade in currencies other than their own, including for things they produce, most importanly in the U$ dollar.
So there have to be no exchange rate system controls, and the Marshall-Lerner condition would have to always be true. But these two conditions are not, in general, true, so the argument doesn't often hold, and the usefulness is severaly limited, as it evident by simply looking at trade in the real world, even if it can describe a certain market tendency among others.
All this also of course ignores the essential, concrete reality of imperialism and colonialism, the role of the U$ dollar as the world's reserve currency, as well as other real world factors which throw a wrench in this simplified, metaphorically frictionless model of how and why countries engage in trade with each other. But China is no longer a country under the imperial boot, although it does continuously intervene to keep the RMB sufficiently low for trade.