As tariff tensions continue to cast a shadow over global trade, debate over China's trade surplus has expanded beyond the United States and Europe to developing economies.
A recent report by the Washington-based Peterson Institute for International Economics, titled "China's mercantilist squeeze on developing countries" — and commentaries inspired by it — has advanced a provocative argument: China is not leaving enough room for latecomers to industrialize, but instead is constraining their development prospects by maintaining dominance in low-skilled manufacturing.
The report estimates that such a "squeeze" could cost developing economies tens of billions of dollars in exports annually, equivalent to millions of manufacturing jobs.
The argument has gained traction among some Western policymakers because it fits a familiar narrative: that China has become an economic force dominating large parts of global manufacturing, leaving limited room for others to industrialize.
But this interpretation rests on a flawed reading of both trade data and global industrial dynamics. It treats international production as a fixed pie, rather than a constantly evolving network shaped by investment, technology diffusion and changing comparative advantages.
China's Ministry of Commerce recently rejected the claim that Chinese industrial development has reduced opportunities for developing countries, arguing instead that China's exports of affordable and high-quality machinery, components and production equipment have lowered the barriers for other economies seeking to industrialize.
The central argument behind the "squeeze" theory is that China's share of global exports in low-skilled manufacturing is disproportionately high. By value, China accounts for nearly 65 percent of such exports — far above what some researchers estimate would be justified by its labor force size.
Yet this comparison relies on a questionable assumption: that export competitiveness is determined primarily by the number of workers a country has.
In reality, industrial capacity depends on a much broader set of factors, including logistics networks, infrastructure quality, reliable electricity supplies, supplier ecosystems and institutional efficiency.
A country does not win manufacturing orders simply because it has abundant labor. It must also have the ability to deliver products efficiently, consistently and at scale.
The comparison also overlooks the very different global environments faced by today's China and developed economies at similar income levels decades ago. The degree of globalization, the speed of technology transfers and the organization of supply chains today are fundamentally different from those of the 1960s.
Without accounting for these structural changes, historical comparisons risk producing conclusions that reflect assumptions rather than reality.
More importantly, static export shares fail to capture the dynamic process of industrial relocation.
China's continued strength in labor-intensive manufacturing has existed alongside — rather than against — the expansion of manufacturing capacity elsewhere. Chinese companies have increasingly invested in Southeast Asia, Africa and Latin America, transferring production capabilities while maintaining deeper integration with global supply chains.
In Southeast Asia, for example, Chinese companies have expanded manufacturing investment in countries such as Indonesia, Malaysia, Thailand and Vietnam. In sectors including electronics and automobiles, a new division of labor has emerged — research, advanced components and core technologies remain concentrated in China, while assembly and downstream production increasingly take place across the region.
This is therefore not a zero-sum competition, but an evolving production network.
The second weakness of the "squeeze" argument is that it treats all manufacturing exports as the same, ignoring the transformation of China's export structure.
China's exports have shifted significantly over the past decade. The share of intermediate goods in total exports increased from about 42 percent in early 2015 to 46 percent by mid-2025, while consumer goods declined from 37 percent to 31 percent.
In simple terms, China is increasingly moving from selling finished products to supplying the machinery, components and technologies needed to make those products.
For developing economies, this distinction matters.
When a country exports capital goods and intermediate products, it is not merely competing with other manufacturers; it is providing tools that enable industrial development elsewhere.
China's rising exports of machinery and electrical products to the Association of Southeast Asian Nations and Africa reflect this trend. These flows increasingly involve production equipment, industrial components and technologies that support local manufacturing capacity.
The "squeeze" argument also attributes China's manufacturing competitiveness largely to currency advantages and industrial subsidies. But such claims often lack convincing evidence.
Research by international institutions has shown that China's industrial support measures have increasingly focused on strategic emerging sectors such as electric vehicles, batteries and renewable energy, rather than traditional labor-intensive manufacturing.
Moreover, Chinese manufacturing wages are now significantly higher than those in many competing developing economies, including Bangladesh and India. Yet Chinese manufacturers remain competitive because of factors such as industrial clusters, supply-chain efficiency, infrastructure quality and economies of scale.
These are structural advantages developed over decades, rather than simply the result of policy distortions.
Indeed, rising labor costs in China may create opportunities for lower-income economies by gradually shifting labor-intensive production elsewhere.
China is a participant in developing countries' industrialization, not an obstacle.
The portrayal of China as a country "taking away the ladder" overlooks the expanding role Chinese companies play in supporting industrial development in the Global South.
Across Africa, Chinese investment has contributed to manufacturing projects, industrial parks and infrastructure development. From Morocco's Mohammed VI Tanger Tech City to industrial cooperation zones in Zambia and Ethiopia, Chinese companies have brought not only factories and employment, but also technical training and supply-chain development.
International organizations, including the United Nations Industrial Development Organization, have highlighted the role of technology transfers, investment flows and access to clean technologies in support of industrialization in developing economies.
China's trade and investment policies have also expanded market access for developing countries. Beijing in May expanded its zero-tariff treatment to cover all 53 African countries with which it has diplomatic ties, while cooperation under the Belt and Road Initiative has continued to expand.
These developments point to a different interpretation of China's role: not as a country restricting industrial opportunities, but as one reshaping how industrialization takes place.
At the multilateral level, initiatives focused on global development cooperation have supported projects in areas including poverty reduction, food security, industrialization and the digital economy, while providing training opportunities for developing-country professionals.
The underlying principle is not about deciding who should surrender market share, but about expanding productive capacity and creating new opportunities.
South-South cooperation is not simply a form of assistance. It reflects changing comparative advantages and mutual economic interests. China provides capital, technology, manufacturing capabilities and market access, while developing economies gain infrastructure, industrial ecosystems and integration into global supply chains.
The global manufacturing landscape is expanding, not shrinking.
Ultimately, the "China squeeze" narrative reduces a complex and dynamic process into a zero-sum contest: every additional percentage point gained by China is portrayed as a loss for others.
But global manufacturing has continued to expand, and international production networks have become more interconnected.
China's role is also changing — from being merely the "world's factory" to becoming a major market, investor and supplier of industrial capabilities.
This does not mean developing countries face no challenges. Weak infrastructure, limited human capital and institutional constraints remain major barriers to industrialization.
But attributing these difficulties primarily to China overlooks the deeper structural issues facing late-industrializing economies.
The Chinese proverb "give a man a fish, and you feed him for a day; teach him how to fish, and you feed him for a lifetime" captures this broader point.
China's engagement with other developing economies is not about removing ladders, but about helping build more of them.
The real question is not whether China is taking industrial opportunities away from others, but whether the global economy can create more pathways for countries seeking to climb the development ladder.
(Source: China Daily)