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China and the Global South: A Major Role Shift in the Era of Globalisation

Dec 23-2025   



*This article is based on a keynote speech delivered by Wang Min, tenured associate professor of economics at Peking University’s National School of Development, and deputy director of the Centre for Environmental and Energy Economics.


China’s Rise Has Profoundly Shaped Its Economic Relationship with the Global South

Over the past 45 years, China has achieved remarkable economic development. Its economic relationship with the Global South has continuously evolved alongside China's progression through the stages of economic development.

The global significance of China’s economic development lies in the fact that its rise has restructured the global economic landscape. Prior to 1990, the global economic framework remained relatively stable, with low-income economies, middle-income economies and high-income economies exhibiting the entrenched “centre–periphery” structure characteristic of development economics. After 1990, however, China’s rapid economic ascent triggered profound restructuring. The share of high-income economies has steadily declined, while that of middle-income economies has increased significantly.

This shift is particularly evident when examining global manufacturing GDP shares. Since 2002, high-income nations’ share of global manufacturing GDP has declined markedly, while middle-income nations’ share has increased rapidly. This structural transformation has been primarily driven by the rapid expansion of China’s manufacturing sector. Against the backdrop of globalisation, China’s economic relations with the Global South have manifested primarily in two areas: trade and investment.

China’s Foreign Trade Relations

China's foreign trade has grown remarkably in scale. In 1978, imports and exports each totalled around $10 billion, accounting for 1% of the global total. By 2023, however, exports had reached $3.56 trillion, while imports reached $2.71 trillion—representing 15% and 11% of the global total, respectively. This high level of trade has naturally led to increasingly close ties between China and the world’s major economies.

Further analysis of China’s trade data with three categories of economies reveals deepening commercial ties with Global South nations. Currently, low-income economies and middle-income economies account for a larger share of China’s imports than high-income economies.

Examining China’s import and export structure by commodity type shows that imports of intermediate goods have steadily declined, while imports of capital goods peaked in 2007 and have decreased since then. Imports of consumer goods have grown slowly, whereas imports of raw materials have surged dramatically and now constitute the largest import category. Changes to the export structure are even more pronounced. The share of labour-intensive consumer goods has steadily declined, while exports of capital goods have grown rapidly. Exports of intermediate goods have remained stable, and exports of raw materials have decreased. These shifts reflect China’s evolving comparative advantage within the global production system, with a gradual transition from labour-intensive to capital-intensive production.

Throughout this process, China’s trade relations with the Global South have deepened. There is a high degree of economic complementarity between China and the Global South: China imports raw materials from the Global South and exports capital goods to it.

China’s Outward Investment Relations

Concurrently, China’s outward investment has demonstrated remarkable performance. In 2023, China’s outward direct investment (ODI) exceeded foreign direct investment (FDI) into China, reaching over $170 billion. This marked a significant transition from being a “major recipient of foreign investment” to a “major investor”.

Outward investment primarily comprises two forms: cross-border mergers and acquisitions (M&As), and greenfield investments—with the latter involving the direct establishment of factories and production facilities in target countries. Between 2005 and 2011, cross-border M&As accounted for the largest proportion of China’s outward investment, representing around 42% of the total. However, a major turning point occurred after 2012, with the proportion of cross-border M&As in China’s outward investment declining sharply from over 40% in earlier years to just 19.5% in 2023. This signifies a substantial increase in the proportion of greenfield investment.

Another shift occurred in 2015, when China’s manufacturing sector suddenly saw growth in outward direct investment. While early Chinese investment focused primarily on resource-based sectors such as mining and petroleum, overseas manufacturing investment now substantially exceeds investment in mining.

Characteristics of China’s Global Industrial Relocation Pattern

In 1962, the scholar Akamatsu proposed a four-stage model of industrialisation for agrarian nations, based on Japan’s experience. This framework closely aligns with China’s trajectory over the past four decades.

Stage One: Agricultural nations primarily export agricultural or mineral products while importing industrial consumer goods. Domestic traditional handicrafts are gradually replaced by imported products.

Stage Two: Leveraging latecomer advantages such as low labour costs, abundant raw materials and a vast domestic market, foreign capital begins to enter. Domestic enterprises import capital goods to produce consumer goods, implementing an import substitution policy.

Stage Three: As manufacturing capabilities improve, the production of consumer goods becomes internationally competitive and enters an export-oriented phase. Simultaneously, the production of capital goods begins to replace imports.

Stage Four: Capital goods are exported while consumer goods are imported from relatively less developed economies, with industrial structures converging towards those of advanced economies.

Throughout this process, both consumer and capital goods undergo three stages of development: initial importation, subsequent domestic substitution and eventual exportation. At the same time, industrial structures at the macro level transition from labour-intensive to capital-intensive sectors. Within specific industries, products evolve from simple to complex technologies and from low to high quality.

With annual outward investment now exceeding $170 billion, China is embodying the global phenomenon of industrial relocation. Chinese enterprises are investing simultaneously in Southeast Asia, Africa, Central Asia, and South America, driven by labour costs and trade barriers. In the absence of trade and geopolitical conflicts, Chinese overseas expansion might still prioritise East and South Asia. However, in the current climate, neighbouring regions such as Europe, Central Asia, and Latin America have also become significant investment destinations.

China’s Economic Cooperation with Global South Nations Faces Multiple Challenges

The development of the Belt and Road Initiative and China’s economic relations with Global South nations have not been entirely smooth sailing and have encountered numerous challenges. Over the past decade, the external debt of low-income economies and middle-income economies, broadly defined as Global South economies, has surged dramatically.

Based on recent research in Africa and Southeast Asia, the industrialisation process in Global South nations is hindered by structural bottlenecks. These nations also struggle to absorb China’s industrial transfers, which manifests in four key ways: 1. Low domestic savings rates and capital shortages, particularly in infrastructure financing. 2. Insufficient human capital and low production efficiency. 3. Macroeconomic fragility, with pronounced exchange rate volatility. 4. Inadequate state governance capacity. For Global South nations to achieve industrialisation, these four major challenges must be effectively overcome.

Additionally, Chinese enterprises face particular challenges when investing and operating overseas, including political and security risks, legal compliance issues, policy uncertainties, financing constraints, capital repatriation restrictions, management challenges in specific local markets, talent shortages, market competition, and insufficient brand development. Effectively addressing these issues is essential for advancing cooperative processes.

 


China and the Global South: A Major Role Shift in the Era of Globalisation

Dec 23-2025   



*This article is based on a keynote speech delivered by Wang Min, tenured associate professor of economics at Peking University’s National School of Development, and deputy director of the Centre for Environmental and Energy Economics.


China’s Rise Has Profoundly Shaped Its Economic Relationship with the Global South

Over the past 45 years, China has achieved remarkable economic development. Its economic relationship with the Global South has continuously evolved alongside China's progression through the stages of economic development.

The global significance of China’s economic development lies in the fact that its rise has restructured the global economic landscape. Prior to 1990, the global economic framework remained relatively stable, with low-income economies, middle-income economies and high-income economies exhibiting the entrenched “centre–periphery” structure characteristic of development economics. After 1990, however, China’s rapid economic ascent triggered profound restructuring. The share of high-income economies has steadily declined, while that of middle-income economies has increased significantly.

This shift is particularly evident when examining global manufacturing GDP shares. Since 2002, high-income nations’ share of global manufacturing GDP has declined markedly, while middle-income nations’ share has increased rapidly. This structural transformation has been primarily driven by the rapid expansion of China’s manufacturing sector. Against the backdrop of globalisation, China’s economic relations with the Global South have manifested primarily in two areas: trade and investment.

China’s Foreign Trade Relations

China's foreign trade has grown remarkably in scale. In 1978, imports and exports each totalled around $10 billion, accounting for 1% of the global total. By 2023, however, exports had reached $3.56 trillion, while imports reached $2.71 trillion—representing 15% and 11% of the global total, respectively. This high level of trade has naturally led to increasingly close ties between China and the world’s major economies.

Further analysis of China’s trade data with three categories of economies reveals deepening commercial ties with Global South nations. Currently, low-income economies and middle-income economies account for a larger share of China’s imports than high-income economies.

Examining China’s import and export structure by commodity type shows that imports of intermediate goods have steadily declined, while imports of capital goods peaked in 2007 and have decreased since then. Imports of consumer goods have grown slowly, whereas imports of raw materials have surged dramatically and now constitute the largest import category. Changes to the export structure are even more pronounced. The share of labour-intensive consumer goods has steadily declined, while exports of capital goods have grown rapidly. Exports of intermediate goods have remained stable, and exports of raw materials have decreased. These shifts reflect China’s evolving comparative advantage within the global production system, with a gradual transition from labour-intensive to capital-intensive production.

Throughout this process, China’s trade relations with the Global South have deepened. There is a high degree of economic complementarity between China and the Global South: China imports raw materials from the Global South and exports capital goods to it.

China’s Outward Investment Relations

Concurrently, China’s outward investment has demonstrated remarkable performance. In 2023, China’s outward direct investment (ODI) exceeded foreign direct investment (FDI) into China, reaching over $170 billion. This marked a significant transition from being a “major recipient of foreign investment” to a “major investor”.

Outward investment primarily comprises two forms: cross-border mergers and acquisitions (M&As), and greenfield investments—with the latter involving the direct establishment of factories and production facilities in target countries. Between 2005 and 2011, cross-border M&As accounted for the largest proportion of China’s outward investment, representing around 42% of the total. However, a major turning point occurred after 2012, with the proportion of cross-border M&As in China’s outward investment declining sharply from over 40% in earlier years to just 19.5% in 2023. This signifies a substantial increase in the proportion of greenfield investment.

Another shift occurred in 2015, when China’s manufacturing sector suddenly saw growth in outward direct investment. While early Chinese investment focused primarily on resource-based sectors such as mining and petroleum, overseas manufacturing investment now substantially exceeds investment in mining.

Characteristics of China’s Global Industrial Relocation Pattern

In 1962, the scholar Akamatsu proposed a four-stage model of industrialisation for agrarian nations, based on Japan’s experience. This framework closely aligns with China’s trajectory over the past four decades.

Stage One: Agricultural nations primarily export agricultural or mineral products while importing industrial consumer goods. Domestic traditional handicrafts are gradually replaced by imported products.

Stage Two: Leveraging latecomer advantages such as low labour costs, abundant raw materials and a vast domestic market, foreign capital begins to enter. Domestic enterprises import capital goods to produce consumer goods, implementing an import substitution policy.

Stage Three: As manufacturing capabilities improve, the production of consumer goods becomes internationally competitive and enters an export-oriented phase. Simultaneously, the production of capital goods begins to replace imports.

Stage Four: Capital goods are exported while consumer goods are imported from relatively less developed economies, with industrial structures converging towards those of advanced economies.

Throughout this process, both consumer and capital goods undergo three stages of development: initial importation, subsequent domestic substitution and eventual exportation. At the same time, industrial structures at the macro level transition from labour-intensive to capital-intensive sectors. Within specific industries, products evolve from simple to complex technologies and from low to high quality.

With annual outward investment now exceeding $170 billion, China is embodying the global phenomenon of industrial relocation. Chinese enterprises are investing simultaneously in Southeast Asia, Africa, Central Asia, and South America, driven by labour costs and trade barriers. In the absence of trade and geopolitical conflicts, Chinese overseas expansion might still prioritise East and South Asia. However, in the current climate, neighbouring regions such as Europe, Central Asia, and Latin America have also become significant investment destinations.

China’s Economic Cooperation with Global South Nations Faces Multiple Challenges

The development of the Belt and Road Initiative and China’s economic relations with Global South nations have not been entirely smooth sailing and have encountered numerous challenges. Over the past decade, the external debt of low-income economies and middle-income economies, broadly defined as Global South economies, has surged dramatically.

Based on recent research in Africa and Southeast Asia, the industrialisation process in Global South nations is hindered by structural bottlenecks. These nations also struggle to absorb China’s industrial transfers, which manifests in four key ways: 1. Low domestic savings rates and capital shortages, particularly in infrastructure financing. 2. Insufficient human capital and low production efficiency. 3. Macroeconomic fragility, with pronounced exchange rate volatility. 4. Inadequate state governance capacity. For Global South nations to achieve industrialisation, these four major challenges must be effectively overcome.

Additionally, Chinese enterprises face particular challenges when investing and operating overseas, including political and security risks, legal compliance issues, policy uncertainties, financing constraints, capital repatriation restrictions, management challenges in specific local markets, talent shortages, market competition, and insufficient brand development. Effectively addressing these issues is essential for advancing cooperative processes.