Chinese firms head to Global South amid rising US tariffs: S&P Global

New Delhi: Leading Chinese firms are heading to Global South amid rising US tariffs and slowing domestic growth, according to the latest S&P Global report.

The report, titled ‘China Inc. Heads To Global South In The Age Of Tariffs’ shows that this trend has accelerated since 2018.

“Trade has been rapidly growing between China and the Global South,” said Charles Chang, S&P Global Ratings’ Greater China Country Lead for corporates. “China now exports over 50 per cent more to these regions, totalling $1.6 trillion, than to the US and Western Europe combined, which total to $1 trillion.”

“Booming trade and investments have helped secure Chinese firms’ access to these markets,” Chang added. On average, China’s trade with its top 20 trading partners in the Global South amounts to nearly 20 per cent of these countries’ GDP.

“These investments bring substantial execution risks, but they are likely to continue — not just to avoid new levies or secure resources, but to develop end markets and reduce reliance on U.S. sales,” said Chang.

“As they continue to head to the Global South, the result could be a new order of global commerce where South–South trade becomes the new centre of gravity and Chinese multinationals emerge as the new key players,” he added.

The report stated that Chinese firms are not just redirecting goods for re-export through Global South regions, but increasingly producing them there. This requires investing in the local economy. Chinese firms’ investments in the country’s four largest trading partners in Southeast Asia, for example, have quadrupled over the past decade to an average of $8.8 billion annually.

New tariffs motivate Chinese firms to explore markets offering pull factors such as facilitating policies or deepening commercial relations with China. Beijing recently stated it sees the “rise of the Global South” as the “future of development.” This view is reflected in the core strategies and plans of many leading Chinese firms, the report stated.

The Global South includes most of the developing world, according to the report.

IANS