The surge in the Chinese trade surplus to a record $14.6bn in July has been followed by the expected pronouncements on its unsustainability and predictions of a destabilising “hard landing” for the US dollar. Yet, the current system of globalised production and liberal financial markets may be more sustainable than analysts maintain.

Capital flows are driven by calculations about risk and return and the rising US import surplus works favourably on both these fronts. US imports of intermediate (as opposed to final) goods and services have risen steadily in the past 15 years and surged recently to more than 25 per cent of all input use in some sectors. These have lowered the cost of production in the US and improved profit margins. At the same time, the development of a wide set of suppliers reduces the risk of production bottlenecks.