China’s Rebalancing: Opportunities and Challenges for LAC Exporters

IMF Working Papers, November 13, 2020

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Canonical URL: China’s Rebalancing: Opportunities and Challenges for LAC Exporters

Authors: Nitya Aasaavari, Fabio Di Vittorio, Ana Lariau, Yuebo Li, Rui Mano, Pedro C Rodriguez
Published: November 13, 2020
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781513561141.001

Asia and Latin America and the Caribbean (LAC) have become increasingly connected over the last 20 years.
China has emerged as both a top trading partner and an important competitor of LAC exports.
China’s retreat from certain markets, due to the ongoing rebalancing process, could:
- open new opportunities for LAC exporters, and
- entail some challenges for LAC exporters.
The authors' results show that China’s rebalancing will have an overall positive effect on LAC’s GDP and exports in the long run, but:
- this effect is small, and
- it is uneven across countries, leading to winners and losers.
Evidence indicates other countries, such as India, are currently trying to fill the gap left by China and could undermine LAC’s competitive advantage in some export markets.
The COVID-19 shock might exacerbate the effects identified in the analysis.

Rebalancing in China alters competitive dynamics for LAC exporters by shifting demand and supply conditions in global markets.
The net long-run effect on LAC is positive but quantitatively limited and heterogeneous across countries and sectors.
Competitive pressure from other emerging suppliers (explicitly noted: India) can offset potential gains for LAC exporters in certain markets.

Reduction of trade barriers would lead to unequivocally positive outcomes for all LAC countries.
Further integration within the region and/or with the rest of the world would also yield unequivocally positive outcomes for all LAC countries.
Policies to increase competitiveness and diversify export markets can help LAC countries capture opportunities from China’s rebalancing while mitigating risks from competing suppliers.

Subject: Comparative advantage, Competition, Exports, Financial markets, Imports, International trade, National accounts, Real exports
Keywords: Asia and Pacific, Asia-Lac trade linkage, Central America, China’s rebalancing, Comparative advantage, Competition, export category, export dependency, Exports, exports of goods, exports of service, Global, Imports, Latin America and the Caribbean, North America, Real exports, trade competition index, trade integration, WP