China’s Exports to Emerging Economies Surge As Alternative to the U.S

Last year, in the face of a protectionism surge in traditional markets, namely the American and European markets, China redirected its ships and cargo trains to other regions. Its largest destination for exports was not the U.S, which stood at $500 billion, but for the first time, Southeast Asia, which marked $524 billion.

China’s focus also shifted towards the Middle East and Latin America, as well as Russia and Central Asia, in high-technology industries that Beijing is now banking on. Chinese electric car sales in 2023, according to industry analyst TP Huang, surged over 100% in Southeast Asian countries like Indonesia, Thailand, Vietnam, and Malaysia. Also in Egypt and Turkey (Middle East), Mexico, and Brazil (Latin America).

For Chinese cars in general, not just electric ones, the two largest markets became Russia and Mexico, with noteworthy mentions also for Saudi Arabia and the United Arab Emirates (Middle East), Thailand, and the Philippines (Southeast Asia).

In Central Asia, sales to Kazakhstan, Kyrgyzstan, and Uzbekistan jumped by 200%. The region is one of the original targets of the Belt and Road Initiative (BRI), launched a decade ago by China to develop infrastructure in partner countries.

“Chinese cars are increasing their market share across emerging markets, including in Brazil,” says Huang. According to him, the China Association of Automobile Manufacturers works with a projection that, excluding China itself, the US, and Europe, this market will buy more than 30 million vehicles this year.

“More importantly, it’s a market that will grow if it can access cheaper vehicles,” he adds. “In Brazil, you may have noticed how BYD sales increased when the Dolphin became available.”

Since 2000, exports between emerging markets themselves have increased from 25% to 40%, according to Gavekal, a consultancy based in Hong Kong and Beijing. The data information was brought to evidence by financial analyst Shuli Ren, commenting on the rise of a “new trade order,” separate from the West and the dollar.

“Emerging markets are already important markets for China. That, in many cases, goes both ways,” says Larissa Wachholz, who served as special advisor to the Ministry of Agriculture from 2019 to 2021, where she helped create the China Nucleus.

She cites the country’s entry into the World Trade Organization in 2000 as the starting point for this “order shift,” followed by the accelerated growth of other emerging markets, mainly India and Southeast Asian countries like Indonesia.

“A clear demonstration of the potential of trade amongst emerging markets were the sanctions against Russia,” she adds. “Exports to China and India kept Russian trade active.”

Beijing accelerated the change in response to measures by the US and Europe to disassociate or “de-risk” their economies through import tariffs, export controls, and even the let-off of agreements with China, such as Italy’s recent withdrawal from the BRI under pressure from Washington. The situation is expected to worsen if Donald Trump is re-elected.

In the Middle East, in addition to the BRI, geopolitical rapprochement with some of the major economies, such as Saudi Arabia and the Emirates, allowed Chinese technology players like Huawei, Tencent, and Alibaba to enter these countries as well.

“We have to think of the BRI as a broad industrial policy,” says Huang. “You need to make your product more usable and cheaper. This means building 5G infrastructure for greater use of consumer electronics. It means building transport fleets and ports and helping to build railways, so volume and cost can be improved.”

In the case of Brazil, imports of Chinese products (including from Hong Kong and Macau) decreased by 12.4% to $53.9 billion. But exports hit a record $105.7 billion, and the partnership grew.

The country’s inclusion in the traditional global tour at the beginning of the year by Foreign Minister Wang Yi was treated in the Chinese press as a sign of the growing bilateral bond, which celebrates fifty years of diplomatic relations in August.

Shortly after, in November, a mega port in Peru, which will have Brazil as one of its potential clients, will be inaugurated with the presence of leader Xi Jinping himself. Chancay, costing $3.5 billion and with a majority stake from the Chinese logistics company Cosco, will serve as the final stop of the Transoceanic Highway that begins in São Paulo.

For Brazilian producers, in addition to advantages stemming from shorter travel times, the port will represent an alternative to the Panama Canal.

“The project reflects China’s long-term infrastructure vision,” says Wachholz. “Today, Chinese competitiveness lies not in cheap labor but in the efficiency of its infrastructure.”

For her, Chancay is symbolic of the growth path that the Chinese have adopted in their own country. “In the medium and long term, having a  more efficient port nearby will be positive for Brazil and Latin American countries.” She believes that some Brazilian states will benefit more than others, such as those in the North region “and the major grain exporter, Mato Grosso.”

The Peruvian port is part of the spread of Chinese trade routes, which encompasses – but is not limited to – the BRI. In Brazil, which has not joined the initiative, China is present in Paranaguá, one of over a hundred ports worldwide in which the country invests or has a stake.

Furthermore, the Port of Vila Velha houses most of BYD imports in the country, which expects to receive the mega-ship Explorer No. 1 this year. “The key to exporting electric cars to Latin America is to deploy ‘pure’ car carrier fleets [solely for automobiles] and expand ports to lower costs to stores,” says Huang. “This could enable BYD, for example, to price the Seagull [in Brazil, Dolphin Mini] at R$99,000.”

Source: Folha de São Paulo

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