Strategies for selecting trading partners based on economic complexity of international trade networks: A comparison between Chinese and the US markets

Abstract

Selecting suitable trading partners in the globalized trade landscape remains critical. Traditional selection processes driven by factors like comparative advantage and trade costs are cumbersome and incomplete. Economic complexity offers a more precise measure of a country’s economic development and product capacity, facilitating future-oriented choices. Leveraging international trade data from 2001 to 2015, this paper employs economic complexity theories to analyze Chinese and the US’ trade networks in the global market. It explores multi-level considerations for exporting countries’ partner selection, revealing varying product diversification challenges and market clustering tendencies. China shows increasing overall product proximity relationships, specifically notable in textile-related products, while the US exhibits decreasing product proximities. Additionally, trading positions and product dependencies vary across markets. Some countries, like Japan and Germany, maintain stable positions, while others fluctuate. Notably, countries like Nigeria, Bangladesh, and Cambodia have higher positions in the Chinese market, suggesting promising long-term trade partnerships. Conversely, countries like Yemen, Kazakhstan, Kuwait, and Sudan have higher positions in the US market, indicating significant disparities. Products that are needed in the Chinese market and occupy higher complexity positions are primarily concentrated in the field of non-ferrous metals, while the US market relies more on raw materials. This highlights distinct market dynamics, particularly pronounced in the US market. Hence, there is a greater likelihood of obtaining better economic benefits by trading these products in their respective markets.