The “China effect” on EU Exports to OECD markets: a Focus on Italy

This paper analyzes the indirect impact of China on the export per-formance of major European countries to their main trading part-ners. Given a strong specialization in manufacturing sector, these countries are likely to be at risk from China’s competition, espe-cially in consumer goods. The heterogeneity in the production (and export) structures of EU countries makes Italy, whose productive structure is based on so-called “traditional” sectors, most vulnerable to China’s competitive pressure. Using data for the period 1995-2009, this paper measures the possi-ble displacement effect at sector and market level. Results show that there is a considerable variation in different EU countries’ exposure to China’s competition and that, in some sectorsthere is indeed a significant negative effect of Chinese exports. This is particularly true for Italy, both in traditional and more capital intensive sectors.