China has been rapidly increasing the exports of manufactured products to OECD markets. In this paper we obtain evidence that the rise of China decreases the export market shares of OECD countries in other OECD markets. We also assess strategies of OECD countries to respond to increasing Chinese competition. OECD countries that upgrade the quality of their export goods strengthen their export position. The evidence for a strategy of variety expansion is less convincing. These conclusions hold for total manufacturing trade. At the sectoral level, the impact of variety expansion and quality upgrading appears to be very heterogeneous.