S&P Global Report: Chinese Companies Shift to the Global South in the Tariff Era

The uncertainty brought about by the U.S. tariff policies has led Chinese companies to shift their focus toward the Global South. Recently, S&P Global released a new report titled “In the Age of Tariffs, Chinese Companies Move Toward the Global South.” The latest report analyzes the trade growth between China and Global South countries in recent years, as well as the challenges Chinese enterprises face when investing in these countries under tariff pressure. Analysts from the agency pointed out that as Chinese companies continue expanding into the Global South, the result may be the formation of a “new global business order,” with South-South trade becoming a new focal point and Chinese multinational corporations emerging as key participants.

Export Growth Doubles in the Past Decade

The S&P Global report shows that in the past decade, China’s exports to Global South countries have doubled, while exports to the U.S. and Western Europe grew by 28% and 58%, respectively, during the same period. This growth trend has been particularly significant between 2020 and 2024, during which China’s exports to Global South countries grew by 65%.

Currently, China’s exports to the Global South (approximately $1.6 trillion) are more than 50% higher than its total exports to the U.S. and Western Europe (about $1 trillion). Notably, China’s exports to three regions—South Asia and Southeast Asia, Latin America, and the Middle East—are nearly equal to its total exports to the U.S. and Europe.

At the same time, since 2015, China’s imports from the Global South have also more than doubled, reaching $1 trillion. This is six times the amount China imports from the U.S. (around $164 billion) and nearly four times its imports from Western Europe ($260 billion).

Chinese Ministry of Commerce spokesperson He Yongqian stated on the 21st during a regular press briefing that China is continuously expanding the space for mutually beneficial cooperation with more trade partners. In the first seven months of this year, China’s trade with emerging and other markets grew by 5%, accounting for 65.5% of total trade, an increase of 0.9 percentage points compared to the previous year. Among these, trade with ASEAN and Africa grew by 9.4% and 17.2%, respectively, both of which were significantly higher than the overall growth rate. Trade with Belt and Road Initiative countries grew by 5.5%, and their share of total trade increased to 51.7%.

In terms of product trade, different regions have their own areas of focus. For instance, the trade in agricultural products between China and ASEAN has continuously expanded in recent years. At the same time, cooperation between China and ASEAN in areas such as electronic information, automotive manufacturing, and textiles has strengthened, driving rapid growth in the trade of intermediate goods. Trade between China and Africa has also continued to grow. More notably, in recent years, China-Africa cooperation has expanded into areas like high-tech, digital economy, artificial intelligence, and climate change response.

U.S. Tariffs as a “Catalyst”

“The high uncertainty under U.S. tariffs will continue to drive Chinese companies toward the Global South,” said an S&P analyst. “The tariff increases may not be the direct cause, but they serve as a common catalyst.”

The report also pointed out that increasingly active trade exchanges have promoted commercial cooperation between Global South countries. The bilateral relations between China and these partner countries have remained stable, providing conditions for Chinese companies to continue gaining market access.

It is worth mentioning that Chinese companies are not merely transshipping goods through this region; they are increasingly engaging in local production. This requires substantial investments in the local area, including manufacturing capacity, infrastructure, supporting services, and worker training. These investments are often supported by government programs aimed at promoting the local manufacturing industry.

Data shows that in the past decade, China’s investment inflows to major Southeast Asian trade partners like Indonesia, Malaysia, Thailand, and Vietnam have been growing rapidly, with an average annual investment of $8.8 billion in recent years. From an industry distribution perspective, different countries show differentiated characteristics. For example, in Thailand, Chinese companies are increasingly investing in the automotive manufacturing industry, thanks to the country’s well-developed automotive supply chain infrastructure and supportive policies for electric vehicles. In Malaysia, nearly 80% of China’s foreign direct investment has flowed into fields like electronics and transportation equipment manufacturing. In Vietnam, Chinese investments have entered 18 of the country’s 21 economic sectors, with over 60% of investments concentrated in the processing and manufacturing industries.

The report takes Indonesia as an example to explain how Chinese companies align their investments and operations with local development goals. For over a decade, the Indonesian government has focused on enhancing local processing capacity for key minerals, and in recent years, further concentrated on the electric vehicle manufacturing industry. In this context, many Chinese companies have invested in local nickel smelting plants. Additionally, companies like Zhejiang Huayou Cobalt and CATL have made significant investments in the country’s power battery industry chain.

Liang Huaixin, a researcher at the National Security and Governance Research Institute of the University of International Business and Economics, stated that in recent years, China and Global South countries have experienced rapid growth in both trade and investment, becoming a key engine driving global economic recovery. This is not only reflected in the volume of bilateral trade and investment but also in the continuous expansion of trade and investment into upstream industries and high-value-added sectors.

Experts: Full Industry Chain R&D Needed for Consumers in Global South Countries

According to a report by S&P Global, China’s direct investment in Global South countries is likely to continue growing, and this diversification strategy may be one of the ways to address the high uncertainty of the “tariff era.” In this context, Chinese companies are both facing opportunities and encountering numerous challenges.

The South China Morning Post reports that Chinese companies’ overseas development still faces various challenges, including unfamiliar business partners, inadequate legal systems and infrastructure, and concerns from host countries about low-price dumping. If Chinese enterprises are unprepared for investment or mishandle it, they may trigger regulatory reviews, leading to some penalties.

The structural issues in trade further complicate matters. Many Global South countries primarily export bulk commodities to China while importing manufactured goods from China. This type of trade relationship has structural characteristics that are difficult to adjust quickly. Although efforts to diversify bilateral relations may lead to improvements, the results will likely take time to materialize.

Despite the challenges, S&P analysts stated: “In the tariff era, these investments may continue, not only to avoid new tariffs or secure resources but also to develop end markets and reduce dependence on sales to the U.S.”

Liang Huaixin stated that, in this context, Chinese companies must also consider potential further suppression measures from the U.S., while simultaneously tapping into the internal potential of Global South markets. Companies should conduct full industry chain R&D targeting consumers in these regions.