On June 27, The Economist published a compelling piece titled “Chinese brands are sweeping the world. Good”. The article highlights how China is rapidly progressing beyond its traditional role as a low-cost manufacturer, producing innovative, competitive global brands in sectors ranging from consumer electronics to EVs.
This development is deeply unsettling for many in North America and Europe. The reflexive response in some quarters — to exclude or tightly restrict Chinese firms from entering domestic markets — may feel like a prudent shield. But in the long term, this approach is likely to undermine domestic innovation, suppress productivity, and isolate us from the world’s most dynamic growth zones.
1. Innovation Comes From Competition, Not Insulation
In his seminal work The Competitive Advantage of Nations, Michael Porter observed:
“Firms protected from international competition rarely innovate, rarely become world-class competitors, and rarely create real economic value.”¹
This insight is worth revisiting. Canadian, American, and European firms do not get stronger by being shielded from global competition — they grow stronger by confronting it. Excluding Chinese competitors may delay difficult transitions, but it also blunts the incentives that drive efficiency, innovation, and performance. Shielding our own industries from Chinese competitors may seem protective — but in reality, it risks breeding complacency, driving up costs, and slowing technological progress.
Mercantilism in the 21st Century
These protectionist instincts also echo a broader shift back toward mercantilist thinking — the idea that national prosperity depends on maximizing exports and minimizing imports. But in a world of highly integrated supply chains, global capital flows, and digital commerce, this 17th-century logic no longer fits.
Attempts to shut out Chinese competition through tariffs, bans, or forced decoupling can backfire. They can raise input costs, isolate domestic firms from global best practices, and provoke retaliation. Moreover, the assumption that economic walls will force reshoring or revive domestic industries has proven simplistic. Strategic engagement, not isolation, is a more sustainable path.
Regional Diversion is Already Happening
Efforts to reduce bilateral trade with China often miss the broader context: China now trades extensively with its Asian neighbors, and its supply chains are already adapting. Much of the trade being “diverted” away from North America and Europe is simply being rerouted — to Southeast Asia, to the Middle East, and to Africa. Trade with China is not disappearing. It is just bypassing us.
Policies focused solely on limiting Chinese engagement miss the point: China is building economic resilience through regional partnerships. If Canada, the U.S., and Europe retreat into protectionism, we risk becoming spectators to a fast-evolving economic reality.
A More Constructive Path Forward
Rather than asking how to keep Chinese brands out, we should ask:
- What do we need to do to compete effectively?
- How do we leverage trade, innovation policy, and regulatory tools to elevate domestic capabilities, not shield them?
- And how do we engage with regional partners — and even with China — in a way that strengthens our own long-term value?
The rise of Chinese brands should be treated as a wake-up call, not a threat. It is a prompt to refocus on competitiveness, productivity, and long-term economic strategy. The question is not how to block the future — but how to meet it on our own terms.
¹ Michael E. Porter, The Competitive Advantage of Nations, 1990.
PGTS Inc. 