China's manufacturing trade surplus and export strength, particularly in low-skill-intensive sectors such as apparel, footwear, and leather is producing a "China Squeeze"—limiting the traditional pathways to economic development for poorer countries. Low- and middle-income countries (LMICs) fear that China's economic rise will not leave room for them to industrialize.
In labor-intensive manufacturing sectors, a country's share of world exports should broadly track its share of the world's low-skilled labor. At the start of the 21st century, China's labor endowment share and global market share were similar. Since then, China's value-added export share has grown much larger than its labor-force share, suggesting that China is exporting goods that could otherwise be made in poorer economies where increased manufacturing could support tens of millions of jobs.
Between 2013 and 2022, among LMICs, China's value-added export share remained around 64 percent, but its labor force share declined by 3 percentage points so that the gap, or "excess exports," increased from 33 to 36 percent of LMIC global exports. For the four sectors captured in this chart, this excess in value-added exports is $110 billion in 2022. The crowding out of LMIC exports by China is therefore substantial. The magnitudes are sizable enough to stymie LMICs' structural transformation and ability to escape from low- and middle-income status.
This PIIE Chart is adapted from Shoumitro Chatterjee (Johns Hopkins University) and Arvind Subramanian (PIIE)'s Working Paper, China's mercantilist squeeze on developing countries.
Data Disclosure
This publication does not include a replication package.
