NEW WORKING PAPER: This paper investigates how geopolitical relationships shape Chinese exports, asking whether exporters systematically favor politically aligned countries-and whether that preference holds during periods of geopolitical turbulence. Unlike most existing studies, which focus on imports or multinational enterprises (MNEs) with a Western-centric perspective, we use a high-frequency panel of over 17 million monthly firm-product-destination export transactions from Chinese Customs (2000-2006). We match this data with the Political Relationship Index (PRI) developed by Tsinghua University to analyze how changes in bilateral political relations shape trade flows. Our empirical strategy relies on a robust log-linear specification with firm-product, destination-country, month and year fixed effects, and controls for tariff variation. We test for both asymmetric and non-linear effects by interacting the PRI with indicators of extreme positive and negative geopolitical events. Our results consistently show that stronger bilateral political relations significantly increase Chinese exports. We also find evidence of asymmetric responses: exporters react more strongly to diplomatic improvements than to deteriorations. Using extreme geopolitical events, we show that positive events amplify the export response to political alignment, while negative events tend to dampen it. This pattern is especially pronounced among foreign firms and exporters of differentiated products, suggesting that political alignment plays a critical role in global value chain dynamics. In a world of growing political fragmentation, our findings underline the growing interplay between diplomacy and international trade. They reveal that friendtrading is not just a policy discourse-it is already reflected in the strategic behavior of exporters.
You are welcome to download, share, or comment on the following working paper:
- Saadaoui, J., Strauss‐Kahn, V., & Creel, J. (2026). How geopolitics influences the exports of Chinese firms (January 25, 2026). Available at SSRN: 6130286.
