China Crafts Trade Future With Developing World Focus

China crafts its global trade network, focusing on FTAs with the developing world, sidestepping the West.

What is China's alternative to the Western-led trade system?

China's integration into the World Trade Organization in 2001 heralded a complex era of engagement with global trade dynamics, distinguished by divergent visions between China and the US. Over two decades later, this divergence has deepened, with China now advancing an alternative trade framework centered on developing nations. This initiative, motivated by escalating trade frictions with the West, leverages China's Belt and Road Initiative, aiming to establish a trade network that minimizes US influence and fosters direct investment and low-tariff trade through bilateral and regional agreements.

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Constructing An Alternative Trade Ecosystem

Amidst growing disparities within the World Trade Organization, China is proactively developing a trade system that prioritizes the Global South. Through over 28 free trade agreements, China is securing a trade architecture that encompasses nearly 40% of its exports, effectively creating a contingency against potential WTO problems. This network excludes Western powerhouses like the US and the EU, reflecting China's ambition to pivot its export strategy towards regions where it can exert more influence and align with its strategic interests.

The shift in China's trade strategy is a response to the challenges facing the global trading system, exacerbated by restrictive measures and the stalling of the WTO's dispute resolution mechanism. Despite these challenges, China's pursuit of bilateral and regional free trade agreements underscores its commitment to fostering an open and inclusive development environment. High-profile negotiations, such as with the Regional Comprehensive Economic Partnership and ongoing talks with the Gulf Cooperation Council and the African Continent Free Trade Agreement, signify China's strategic intention to deepen its trade ties outside the traditional Western sphere.

Line Chart
Africa's Imports
Source: IMF DOTS

Redefining Global Trade Relations

China's expanding network of free trade agreements, alongside its significant role in the Belt and Road Initiative, is reshaping its trade relationships, particularly with developing countries. This realignment, driven by both economic and geopolitical considerations, aims to mitigate the vulnerabilities associated with trade frictions with the US and the EU. However, the effectiveness of this strategy in insulating China from global trade tensions remains to be seen, as challenges related to industrial subsidies and fair trade practices persist.

Through strategic investment and the cultivation of new trade partnerships, China is not only seeking to diversify its economic engagements but also to influence the global trade architecture, positioning itself as a leader in a rapidly evolving international landscape. This approach reflects China's long-term vision of a trade ecosystem that supports its development goals and strengthens its position on the global stage.

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