'China squeeze' narrative debunked, challenged

While the "China squeeze" discourse, which negates China's positive role in global industrialization, has begun to circulate, experts said this hypothesis lacks grounding in terms of both economic logic and factual evidence, and fundamentally misrepresents China's role in global industrialization.

Far from being a threat, experts said, China's industrial development and upgrading are actively propelling the industrialization of countries across the world.

The "China squeeze" concept gained prominence following a May research report by the US think tank Peterson Institute for International Economics. This report posited that China's manufacturing sector was "squeezing out" the industrialization space for Global South countries in low-tech, labor-intensive industries.

Since its inception, a growing chorus of international economists and trade experts have voiced criticisms, arguing the narrative is not only economically flawed but misleading about the realities of modern global development.

Adam Tooze, a professor of history at Columbia University in New York, said on the online publishing platform Substack that the "China squeeze" discourse relies on a counterfactual understanding of economic development, thereby pathologizing China rather than confronting the complex domestic issues within the affected countries.

Dani Rodrik, professor of international political economy at Harvard Kennedy School, went further in a Project Syndicate commentary, challenging the underlying assumptions of trade balances. He argued that "when economies run near full capacity, it is not clear that trade deficits should be a cause for concern. After all, they represent a transfer of purchasing power from surplus countries (China), which can lead to higher consumption or, more desirably, investment (in recipient countries)".

Rodrik suggested that by this logic, "China's surpluses might as well be called enrich-thy-neighbor" rather than "beggar-thy-neighbor", highlighting a positive rather than negative impact.

Peng Bo, a researcher at the Chinese Academy of International Trade and Economic Cooperation, pinpointed the main defect of the "China squeeze" narrative: it rests on the belief that global development is static and markets are finite, which leads to the conclusion that China's industrial growth crowds out other nations' industrialization efforts.

But this assumption, he said, is demonstrably false. "In fact, China's development provides other nations with more affordable raw materials, larger markets, and improved foundational conditions, ultimately fostering better environments for their industrialization."

Experts also revealed a deeper motivation behind the evolving negative narratives about China's economy, from "China Shock" to "China Shock 2.0" and now "China Squeeze". This progression, they suggest, represents a concerted effort to stigmatize, pressure, and ultimately restrict China's development through public opinion.

Su Qingyi, director of the Department of International Trade at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, noted that these narratives share a common bias. "They only view Chinese exports to the rest of the world through a negative lens, refusing to acknowledge China's contributions."

Lowering entry barriers

"In fact, through the export of intermediate goods and increasing outward investment, China is systematically lowering the entry barriers for global manufacturing, helping other countries establish and upgrade their own industrial systems," said Su.

The McKinsey Global Institute's March report, Geopolitics and the Geometry of Global Trade: 2026 Update, corroborates this view. The report said China increasingly serves as a "factory to the factories", with its export structure transforming to emphasize intermediate inputs and capital goods that support production elsewhere.

Beyond direct trade, Peng also highlighted China's status as one of the world's leading outward investors. Chinese outward investment, he said, forms a crucial foundation for industrialization and upgrading of industries in other nations.

According to the Ministry of Commerce, as of 2025, 33 China-Africa Economic and Trade Cooperation Zones in Africa have accumulated investments exceeding $13 billion, generating over $55.5 billion in output and creating 90,000 direct local jobs.

Experts also noted that China's ongoing industrial upgrading is further bolstering the global economy.

Peng noted that China's industrial upgrading is transitioning from "product output" to "technology +collaborative empowerment".

"China's exports of electric vehicles, lithium batteries, and photovoltaic products — alongside artificial intelligence, robotics, and innovative medicines, provide the world with high-value, cost-effective green technologies and intelligent solutions, significantly reducing the barriers for countries undertaking energy transition and digitalization," said Peng.

A 2025 report by Ember, a global energy think tank, revealed that China's electro-technology manufacturing capacity is now large, efficient and sophisticated enough to deliver the bulk of the goods needed for the global energy transition at prices affordable in most markets.

"To some extent, China's industrial development and its process of upgrading and outward industrial relocation, are leading global industrial development into a new era. This era makes industrialization no longer the industrialization of a minority of people in a minority of countries, but the industrialization of the vast majority of countries and the majority of the global population," said Peng.

yangran1@chinadaily.com.cn