Trade patterns of China and India

Abstract

China and India are playing an increasingly significant role in global trade. In 2016, their joint share of the global trade in goods reached around 14%, while their share of services came to 7.5%. They have very different trade profiles, however, also reflecting very different internationalisation strategies. Since opening up in the 1980s, China has taken on a global trade hub role, thanks to its growing integration into global production chains for manufactured goods. More recently, China has undergone a shift in trade specialisation towards a pattern characterised by the export of products with higher domestic value added (i.e. it has moved up the global value chain). India’s integration into global value chains has been much more limited and, since the early stages of its economic liberalisation, services have accounted for a substantial share of its exports. Although India’s export profile has remained fairly stable in recent decades, a growing weight of manufacturing exports with a greater import content has recently become discernible. Against this background, the estimation of goods export demand equations shows how, in the long run, external demand is the factor that wields most influence on developments in both countries’ exports, albeit more powerfully so in China, while price-competitiveness has a greater influence on Indian exports