China Is Pulling Up the Ladder Behind It: How Beijing’s Export Strategy Will Keep Poor Countries Poor

Foreign Affairs | Shoumitro Chatterjee and Arvind Subramanian

China's economic rise is increasingly hindering the industrialization of poorer countries, a phenomenon termed the "China squeeze." Unlike past developed nations, Beijing dominates new manufacturing sectors like electric vehicles and solar panels while retaining comparative advantage in older, labor-intensive industries such as apparel and footwear. This strategy prevents developing nations, particularly in Africa and South Asia, from accessing the traditional path to prosperity via manufacturing exports.

China's trade surplus, at a historic high, generates negative spillovers, with its "excess" low-skill value-added exports estimated at over $355 billion in 2022, despite rising wages. This dominance, potentially fueled by an undervalued renminbi, is historically unusual and economically consequential, narrowing development possibilities for latecomers. Corrective action, including duty-free access for labor-intensive imports into China, is needed to prevent a breakdown of the international trading order.

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