How will China’s trade surplus impact EMs?

While EM policymakers haven’t raised concerns about Chinese overcapacity in the same way that their counterparts in the US and Europe have, they too are facing widening trade deficits with China. We suspect EMs will be less likely than DMs to turn to protectionist measures. But the surge in China’s manufacturing exports could remove a rung on the development ladder for those EMs with aspirations to become manufacturing hubs and prompt them to re-assess their political and economic ties with China.

In view of the wider interest, we are also sending this Emerging Markets Update to clients of our China Economics service.