China is decoupling from the West

Since the 2018 trade war between the United States and China began, Western businesses have been urged to distance themselves from China and lessen their reliance on Chinese products. Surprisingly, a similar trend has emerged in China, resulting in Western nations losing their export markets. Economists at the Bank of Finland analyzed how Chinese imports evolved from 2015 to 2025.

To classify nations, the researchers distinguished between 'Western' and 'Eastern' blocs based on their stance toward Taiwan. If a nation does not acknowledge Taiwan and adheres to China's policy, it is categorized as part of the Eastern bloc. Conversely, if a country recognizes Taiwan or maintains diplomatic relations with it, it is classified as part of the Western bloc.

The charts illustrate the swift changes in China's imports of iron and steel (left) and nickel (right) following the pandemic. During this period, the West imposed economic sanctions on Russia and concentrated on decoupling from global suppliers that are geopolitical adversaries. Consequently, China's imports of these commodities have surged, and the exports of Western-aligned countries have declined. The market shares of exports of iron, steel, and nickel are shown in the accompanying source.

Analyzing the change in import origins for all goods between 2015 and 2025 reveals that China has predominantly shifted away from the US and toward Brazil and Russia. Brazil's exports are primarily driven by soybeans and other agricultural products, while Russia's exports are primarily oil and gas. However, countries in South America and South Asia have also increased their exports to China, resulting in a greater dependency on Chinese demand for these countries.

Conversely, Germany, South Korea, and Japan have experienced the most significant drop in exports to China since the US.