China's Mercantilist Squeeze on Developing Countries

China's resurgent trade surplus has revived concern in the United States and Europe, but consequences for low-and middle-income countries (LMICs) remain underappreciated. This paper documents a "China Squeeze": China's compression of the industrialization space poorer economies need in labor-intensive manufacturing. Using historical benchmarks and labor-endowment comparisons, we show that China, despite becoming richer and moving up the technology ladder, still commands a historically unusual share of global lowskilled manufacturing export markets. We estimate that this squeeze costs LMICs hundreds of billions of dollars in forgone exports. It also operates through rising Chinese import competition in LMIC markets and China's limited absorption of low-skilled imports from poorer countries. Macro evidence suggests that policy distortions, including exchange rate undervaluation, may have amplified the squeeze. The central concern is developmental: China's export strength may close off pathways to industrialization for poorer economies.