As top US and Chinese officials gear up for critical trade talks in Stockholm, pressure is mounting on Beijing to reduce its massive export dependence — a challenge that could redefine the future of the global economy.

US Treasury Secretary Scott Bessent has put China’s industrial overcapacity and low domestic consumption squarely on the table, calling it “the elephant in the room.” He warned that China’s near 30% share of global manufacturing exports is unsustainable and likely to shrink.

The talks follow recent US trade breakthroughs with Japan, Indonesia, and the Philippines, strengthening Washington’s leverage. China, meanwhile, is under fire for buying oil from sanctioned nations like Russia and Iran, further straining relations.

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Although these issues are not new, China has long struggled with rebalancing its economy away from exports and heavy infrastructure investment toward consumer-driven growth. While the US and EU blame subsidies for flooding markets with cheap goods — especially steel and electric vehicles — China faces its own internal economic headwinds, including deflation, falling demand, and a shrinking population.

The Chinese government is responding with rebates and trade-in incentives, but economists argue that deeper reforms are needed. That includes expanding healthcare, pensions, and social safety nets to unlock household spending and reduce the public’s tendency to save.

Beijing’s high-tech push, including rapid EV and AI growth, may be worsening the overcapacity problem. Experts now suggest incentivizing local leaders to boost consumption and household income — rather than chasing GDP targets.

Whether China can successfully shift toward sustainable, domestic-led growth remains uncertain. As the US and EU turn up the pressure, the coming talks may offer a preview of China’s economic future — or its breaking point.

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