How dependent has the world become on trade with China? Does it matter?

Trade is increasingly weaponized by countries trying to influence the behaviour of others. In part, this is a function of the growth of trade and its ensuing economic gains. The deterioration in a trade relationship costs both parties, but where the relationship is significantly asymmetric, the weaker party often bends to the will of the more powerful.

In this paper – the second installment of a Hinrich Foundation series on trade dependency – Research Fellow Stewart Paterson looks at the increasing dependency of much of the world on trade with China, and the subsequent potential influence of the country. Paterson began by examining China’s aggregate exports and comparing them to those of the United States, before proceeding to look at the sector concentration of China’s exports to identify strategic areas where it has gained monopolistic power. The paper then considers the role China plays as an importer of goods and an exporter of capital. Finally, Paterson raises questions on the degree to which the world economy has become dependent on China and the implication this has for the ability and willingness of countries to resist China's economic coercion when their interests diverge.