Shifting Dynamics in Trade Relations with China

Several fundamental shifts influence China's trade relations with developed countries:

• Ascension in the value chain: Developed countries are less willing to absorb Chinese exports in high-value, technologically complex sectors like cars and aviation, compared to traditional sectors like textiles.
• Weakening trade reciprocity: China's demand has softened post-COVID, while its exports remain robust due to supply-side stimulus, leading developed countries to perceive a worsening trade deal.
• Collapse of political liberalization bargain: The implicit agreement of economic exchange for political liberalization is no longer believed, removing the political justification for powering China's economic and technological growth through Western markets.
• European concerns: Europe fears deindustrialization of its auto industry, a crucial economic backbone, exacerbated by high energy prices and wages, leading to potential trade conflicts with China.