Partner Similarity and The Sectoral Evolution of China's Trade

RePEc Short ID: psa547
ORCID iD: 0000-0002-3788-4511

Fisgin, Ece; Gaillard, Alexandre; Santacreu, Ana Maria; Young, Henry L.; de Soyres, Francois

doi:10.20955/wp.2026.001

Working Paper

Partner Similarity and The Sectoral Evolution of China's Trade

Abstract: We study how the sectoral composition of exports and imports shapes bilateral trade flows. Building on earlier similarity indices, we introduce the Partner Similarity Index (PSI), which measures sectoral alignment between a country’s export structure and its partner’s import demand. Embedded in a gravity framework, PSI is a strong predictor of bilateral trade flows after accounting for standard gravity determinants, trade policy variables, and high-dimensional fixed effects. Applied to China and advanced economies, the index reveals growing asymmetries: China’s export basket is increasingly aligned with advanced-economy import demand, while China’s import demand has become progressively less aligned with advanced-economy exports.

JEL Classification: F12; F14; O33;

https://doi.org/10.20955/wp.2026.001