Partner Similarity and The Sectoral Evolution of China's Trade

François de Soyres, Ece Fisgin, Alexandre Gaillard, Ana Maria Santacreu and Henry L. Young

No 2026-001, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We study how the sectoral composition of exports and imports shapes bilateral trade flows. Building on earlier similarity indices, we introduce the Partner Similarity Index (PSI), which measures sectoral alignment between a country’s export structure and its partner’s import demand. Embedded in a gravity framework, PSI is a strong predictor of bilateral trade flows after accounting for standard gravity determinants, trade policy variables, and high-dimensional fixed effects. Applied to China and advanced economies, the index reveals growing asymmetries: China’s export basket is increasingly aligned with advanced-economy import demand, while China’s import demand has become progressively less aligned with advanced-economy exports.

Keywords: international trade; export similarity; sectoral composition; gravity (search for similar items in EconPapers)
JEL-codes: F12 F14 O33 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2025-12-31
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DOI: 10.20955/wp.2026.001

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