China's increasing orientation to EM rather than DM trading partners

China's rise to become the world's manufacturing powerhouse was associated with exports to Western markets, starting in textiles and moving up the value chain to high-tech goods. But today, exports to emerging markets are growing much more quickly.

Our chart tracks this long-term reversal. We've indexed EM and developed market exports in USD terms to mid-2018, when the first Trump administration imposed tariffs on China. Growth trends for EM and DM exports diverge in 2019. The growth rate for exports to EMs truly pulls away from 2022; meanwhile, DM exports retreat, and then plateau.

Emerging markets have not only become the "marginal buyers" of Chinese exports but also key destinations for capital goods, components, and intermediate goods (i.e., goods used to make other goods). China's trade pivot is both a reactive adaptation to US moves and a proactive choice that targets growing, increasingly sophisticated countries with their own export sectors.

Aside from the US, China's share of most regions' imports has been increasing -- especially in Russia, Vietnam, and Saudi Arabia. (We recently explored how Brazil became China's no. 1 trading partner; to be sure, countries like Brazil are concerned about potential de-industrialization of their economies due to the reliable and inexpensive supply of Chinese imports.)

Finally, we take a renewed look at Vietnam. It's a global supply-chain player in goods like electrical components, with its factories fed by critical inputs from China and sending finished goods to the US and other Western markets.

Note: The two categories we use in our charts are based on International Monetary Fund standards, which group nations into "advanced economies" (AEs) and "emerging market and developing economies" (EMDEs). The IMF's definitions consider "emerging markets" to be higher-income and more integrated into the global economy than "developing economies;" it's also notable that the IMF classifications include Singapore, Israel, Czechia and South Korea as developed markets.

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