China and the World: Inside the Dynamics of a Changing Relationship

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The relationship between China and the rest of the world appears to be entering a new phase. China’s economic miracle was fueled by industry and investment, but today domestic consumption is the main driving force of growth. The country is becoming less exposed in economic terms to the rest of the world. However, reflecting China’s rise to being the world’s second-largest economy and its leading trading nation, the rest of the world is becoming more exposed to China. These shifts have been accompanied by trade tensions and rising protectionism in many countries, raising the question whether we have reached a point of peak integration between China and the world.

In this report, we look at the extent of China’s global scale and integration, and highlight the findings of the new McKinsey Global Institute China-World Exposure Index. We examine the exposure of sectors and countries to the China-world relationship, with particular emphasis on the technology and consumer sectors. Finally, we simulate what value might be at stake for China and the rest of the world from less engagement and from more engagement, and briefly explore how businesses might navigate what may be a highly uncertain environment. This report is part of a series of MGI publications on global trade that includes Digital globalization: The new era of global flows in March 2016 and Globalization in transition: The future of trade and value chains in January 2019.