The need for China to expand its economic presence in the Global South has never been greater, amid the triple challenges of a weak domestic market, more trade-restrictive regulations from the West, and overcapacity in some sectors.
Expanding Global South’s Market
Over the past five years, China has significantly ramped up its exports to BRICS Plus and ASEAN. In 2023, Chinese exports (Value/USD) to these markets almost matched its exports to the EU and the US combined, with a 56% increase compared to 2019.
Outlook
The United States and the European Union will introduce more customs regulations targeting Chinese products in 2024, which could affect the changing political and economic dynamics of China’s trade with these emerging markets.
Vietnam and India
Vietnam and India are typical «China Plus One» countries, with around 70% of their imports from China being intermediate goods. In the first semester of 2024, the resumed demand in Europe and the US, coupled with disruptions in the Red Sea, contributed to a rebound of Chinese exports to Vietnam and India. For example, Indian and Vietnamese imports of Chinese semi-conductors (critical intermediate goods for consumer electronics) grew by 21% and 55% respectively, surpassing their overall growth in imports from China.
The expanding US scrutiny of Chinese investments in production in ASEAN affects the supply of intermediate goods to Vietnam and other Southeast Asian countries. A typical case is solar panel-related supply chains. China’s solar panel exports to Vietnam plunged moderately, roughly by 2% in the first five months of 2024. However, a 24% global decrease in this category was recorded in ASEAN’s imports from China.
For India, it is more the India’s own trade-restrictive measures rather than the EU and US regulations that hinder Chinese exports. Driven by geopolitical concerns, especially the unresolved China-India border clash, India is strongly motivated to reduce its reliance on Chinese supply. On the one hand, China’s share in Indian intermediate goods jumped to 26% in 2023 from the pre-pandemic 19% (2019).
In the long run, these emerging countries’ dynamic economic prospects may translate into market potential for finished products. Southeast Asia has undoubtedly been a critical market for Chinese products, especially EVs and e-commerce.
Brazil and UAE
Chinese products are gaining some momentum in Brazil and the UAE.
Unlike Chinese EVs in the EU, which are still waiting for market recognition, Chinese EVs already have clear first-mover advantages in emerging markets. Some Chinese models are best sellers in Brazil, UAE, and Thailand, paving the way for further expansion. In the first half of 2024, Chinese exports of EVs (number of units) to Brazil were multiplied by 22, making Brazil the third largest Chinese EV export market, behind Belgium and the UK. Likewise, the UAE’s imports of Chinese EVs have grown by 160%, making it the largest destination in the Middle East for Chinese EVs.
However, one inherent risk is the fierce competition among Chinese EV producers in overseas markets, which could eventually curtail the consumer demand. For example, the swing in EV prices in Thailand amid a price war has been counter-productive. The uncertainty of the price development has incited consumers to take a wait-and-see attitude.
