The Asian giant is reshaping the global landscape with its trade preferences. The China Shock was driven by what China sold to the world. The China Choke will be defined by what it can withhold, what it chooses to buy, and from whom. Latin America and the world have a great deal at stake.
Postal workers monitor humanoid robots on the sorting line at the Guangzhou Mail Distribution Center in China’s Guangdong province in September.
This article is adapted from AQ’s forthcoming issue on Mexico’s path forward
For a quarter of a century, the economic consequences of China’s rise on the global stage have been interpreted through the idea of the China Shock: the disruptive flow of products the country began selling to the world as it became the ultimate manufacturing hub. Today, a different phenomenon is emerging with equal, if not greater, repercussions for all.
The question is no longer simply how economies absorb the volume and competitiveness of Chinese exports, but how they manage their dependence on strategic products, technologies, and industrial inputs that China controls—and may decide to withhold. There is also a less-discussed dimension: What happens when China buys less from the world while concentrating its purchases among a smaller number of strategic suppliers? That’s what I call the “China Choke.”
The China Shock described the impact of China’s rapid integration into the world economy, especially after its accession to the World Trade Organization in 2001. Hundreds of millions of Chinese workers entered the global labor force, multinational companies shifted production, and consumers gained access to cheaper goods. China became the factory of the world—lowering prices and lifting hundreds of millions of Chinese citizens out of poverty—while factories closed across the United States, Europe, and Latin America as manufacturing migrated to China.
Economists David Autor, David Dorn, and Gordon Hanson documented how Chinese import competition produced job losses in exposed regions of the U.S. In Latin America, the Shock was not the only cause of the region’s premature deindustrialization, but it played an important role. In the mid-1980s, Brazil was one of the Southern Hemisphere’s most important industrial hubs. Today, manufacturing accounts for only about 12% of its GDP.
The Shock concerned the disruptive consequences of the products China sold. The Choke concerns the strategic power the country derives from controlling what the world cannot easily obtain elsewhere.
China no longer occupies only the final-assembly stage. It has built commanding positions in critical minerals, rare-earth processing, permanent magnets, batteries, solar panels, and countless intermediate goods—bottlenecks it can exploit through export licensing, delays, or outright prohibitions. An interruption involving an inexpensive but irreplaceable component can paralyze an entire production system.
