China’s economic transition and what it means for exporters

Much of the global narrative around China today focuses on its challenges, including the lingering effects of the property sector crisis, weak domestic consumption and the resulting deflationary spiral. Yet despite these headwinds, China remains a central force in the global economy.

As the world’s second-largest economy, valued at approximately US$19 trillion, China accounts for close to 30% of annual global gross domestic product (GDP) growth. The country has delivered about 5% real GDP growth for two consecutive years. Its record US$1.2 trillion merchandise trade surplus last year further highlights China’s ability to adapt amid persistent global trade uncertainty.

China is no longer just the world’s factory

China’s economic gravity, however, has shifted. The old model of a low-cost, export-led manufacturing hub has faded. Today’s China is a larger and more complex economy that’s less dependent on exports, even as it continues to export far more in absolute terms.

This evolution reflects a deliberate rotation away from low-value manufacturing toward higher-value and more technologically advanced goods, including electric vehicles (EVs), batteries and advanced machinery. As China climbs the value-added ladder, exports continue to generate greater wealth, even though their share of the economy has declined from well-above 30% in the mid-2000s to about 20% in recent years.

Record exports also highlight the growing diversification of China’s trade base. As exports to the United States have softened, China has redirected trade toward Southeast Asia, the European Union and the Global South. This geographic diversification has helped sustain export growth despite a more challenging global trade environment.

Industrial policy enters a new phase

While government policy continues to emphasize industrial modernization, a notable shift is underway. China is now more focused on building globally competitive high-tech industries, a strategy reinforced by its 15^th Five-Year Plan (2026-2030).

As with previous plans, industrial upgrading and technological self-reliance, particularly in semiconductors and advanced manufacturing, remain core objectives. The key difference is a stronger emphasis on developing commercially viable high-tech industries capable of succeeding in global markets. To achieve this goal, Beijing is signalling stronger central government co-ordination and reduced reliance on local government initiatives–marking a meaningful evolution in industrial policy.

What China’s strategy means for Canadian exporters

For Canadian exporters, this shift matters. China’s economy is increasingly rewarding investment that aligns with central government priorities. Import demand now favours goods that support food security, the energy transition, technology upgrading and supply chain reliability. In areas where domestic supply is constrained, international partners remain essential.

China continues to rely on imports of oilseeds and protein feeds due to structural food security concerns. Canada is a leading supplier of canola to China and a key exporter of peas, seafood, pork, premium food products and potash. China is also seeking reliable supplies of liquefied natural gas (LNG) and critical minerals to support its clean energy transition and rising energy demand, driven in part by artificial intelligence (AI) and data infrastructure expansion.

Balancing opportunity with risk in the Chinese market

For Canadian firms, the most compelling opportunities lie in sectors closely aligned with China’s policy priorities, including agri-food, cleantech and advanced manufacturing. At the same time, doing business in China continues to present challenges.

These include weak domestic consumption tied to the multi-year property sector crisis, elevated household savings, geopolitical and tariff uncertainty and heightened environmental, social and governance (ESG) and intellectual property risks. Together, these factors reinforce the importance of strong market intelligence and disciplined risk management when operating in China.

It’s also critical to recognize that China’s economic activity is organized around distinct regional engines. Advanced manufacturing and technology clusters dominate eastern China, while electronics-driven consumer supply chains are concentrated in the south. Successful market entry requires region-specific strategies rather than a one-size-fits-all approach.

The bottom line: How China’s economic transition is reshaping global trade

China has upgraded its industrial base and diversified its trade relationships, resulting in an economy that remains deeply integrated into global markets and supply chains. While domestic challenges persist, the country continues to rely on foreign suppliers, including Canada, where domestic supply is constrained and reliability matters.

For Canadian investors and exporters taking a targeted, sector‑focused approach, China offers tangible opportunities across priority sectors. These prospects are further supported by recent improvements in Canada-China trade relations.

For additional insights on China, read our Export Development (EDC) article, Doing business in China in 2026: Opportunities for Canadian exporters.

This week, a very special thanks to Susanna Campagna, principal country risk analyst.

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