Shifting currents: China's import realignment

Eeva Kerola, Tuuli McCully and Riikka Nuutilainen

No 4/2026, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: This paper examines whether China has reallocated import sourcing away from West-leaning economies amid heightened geoeconomic tensions and a policy push to strengthen supply chain security. Using monthly bilateral trade data for 121 economies over 2015-2025 and a difference-in-differences framework, we compare changes in countries' shares of China's imports across blocs defined by their official positioning on Taiwan. We find evidence of a relative decline in imports from Westleaning countries beginning in 2018, with divergence strengthening after 2020 and intensifying further in 2022. The pattern is concentrated on a limited set of rawmaterial sectors, especially mineral products and base metals. For goods covered by Western export controls to Russia, we find no evidence of a broader shift in China's sourcing. Overall, China's import realignment appears broad-based across West-leaning source countries, but has so far remained selective across product categories. China's shift toward importing from friendly nations is likely to contribute to larger bilateral trade surpluses with Western economies, provided that China's exports to these markets remain robust.

Keywords: China; international trade; supply chains; fragmentation (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 F51 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:342408

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