logo
Global South emerges as world's 4th bloc for economic growth

Global South emerges as world's 4th bloc for economic growth

THE era of "United States exceptionalism" may be over — and with it, the Washington-led world economic and financial order of the last 50 years.
This leaves investors with a big question: How will this reshape capital flows?
The most obvious destination is Europe, home to the world's second-largest economy and second-biggest reserve currency, where markets are deep and liquid and the rule of law reigns supreme.
The so-called "Global South" may seem less attractive. Its 100-plus disparate countries, excluding China, carry the typical smorgasbord of emerging market risks, including political instability, legal concerns, and policymaking credibility.
But the global economic and investment landscape is changing rapidly — and perhaps irreversibly — and investors may be skittish about once again finding themselves over-concentrated in any one region.
Investors with long-term horizons and high risk thresholds may, therefore, increasingly consider boosting their allocations to this enormous and varied "bloc."
These countries have long punched below their financial market weight. But could they be poised to benefit from a global capital reallocation shift?
That's among the findings in a report published last week by Deutsche Bank strategists, The Global South: A Strategic Approach to the World's Fourth Bloc.
"The time for the Global South is now," states the report, which broadly defines the bloc as the 134 member countries of the G77 group of nations, excluding China, Russia, Singapore, and a few others, and adding Mexico, Turkiye, and some Central Asian countries.
Some numbers here are worth noting. The group is home to almost two-thirds of the world's working-age population, produces 40 per cent of the world's energy and key transition metals, accounts for a quarter of global trade, and has attracted nearly a quarter of all inward foreign direct investment (FDI) over the past decade.
Indeed, the Boston Consulting Group says FDI in the Global South in 2023 totalled US$525 billion, surpassing FDI into advanced economies, which stood at US$464 billion.
And while it is far too early to say how countries will align politically, economically, or militarily in the years ahead, there are already signs of capital rotating into the Global South and away from China.
Deutsche Bank's report notes that foreign investment into the Global South has held relatively steady in recent years.
China's economic rise in recent decades has been one of the most astonishing in human history. In 1990, China accounted for only two percent of developed economies' gross domestic product (GDP).
By 2021, that figure had reached 33 percent, almost matching the Global South's then share. But China's growth rates have stalled, especially since the pandemic.
The International Monetary Fund forecasts China's share of advanced economies' GDP will end this decade around 35 percent, while the Global South's share will rise to a new high of 40 percent.
From an equity allocation perspective, there is a lot of space to grow. The Global South made up a mere 11 per cent of global market capitalisation at the end of last year, with India and Saudi Arabia accounting for more than half of this share.
If the dominance of US equities wanes — they currently make up more than 70 per cent of global market cap — even a tiny reallocation to this group could have a big impact on valuations in these countries.
The risks, however, are manifold, and many were on display during the market turbulence sparked by US President Donald Trump's tariffs.
"The current environment differs fundamentally from past episodes. This is not an exogenous shock but a deliberate policy action with structural objectives. As a result, the scope for rapid normalisation is limited," said the Institute of International Finance.
But what really matters here are not "rapid" moves, but the structural changes in the global economy that the US administration's unorthodox policies may have catalysed.
It's worth remembering that Chinese exports to "conductor economies" in the Global South have doubled since Trump's first trade war in 2018.
Given how unreliable the US now appears, it is reasonable to assume that both China and Europe may be seeking to further diversify their export markets.
So perhaps the time is not now for the Global South — but it could be coming soon.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Favorable biz environment fuels South Asian culinary ventures in China
Favorable biz environment fuels South Asian culinary ventures in China

Borneo Post

timean hour ago

  • Borneo Post

Favorable biz environment fuels South Asian culinary ventures in China

A waiter arranges tableware in the dining room of a South-Asian food restaurant in Lanzhou, northwest China's Gansu Province on May 15, 2025. – Xinhua photo LANZHOU (June 12): Mint-green sofas, glistening crystal wall lamps, mosaic-tiled walls, and the rich aroma of spiced South Asian cuisine – every detail of Imran Ali's restaurant exudes exotic charm, which has helped it become a hit on social media in Lanzhou, capital city of northwest China's Gansu Province. Hailing from Islamabad, the 33-year-old Pakistani businessman came to China in 2012 to pursue higher education. Over the next 13 years, his culinary journey across the country deepened his appreciation for Chinese cuisine and his emotional connection with China. Upon graduation, he chose to stay and channel his passion for food into a full-fledged career in the restaurant industry. 'China's culinary landscape is incredibly diverse, while diners here are open to trying new things, especially young people who see food as a way to connect and socialise,' Ali said. 'That's why I wanted to introduce authentic South Asian flavors to more Chinese cities.' Ali and his Chinese friends opened five South-Asian food restaurants in Jiangxi and Shanxi provinces years ago, which served as a catalyst for their expansion. Encouraged by their success, he set his sights on a broader market. In October 2024, he launched a new restaurant in Lanzhou. A chef prepares a dish in the kitchen of a South-Asian food restaurant in Lanzhou, northwest China's Gansu Province on May 15, 2025. – Xinhua photo The region's multi-ethnic population and traditional preference for beef, lamb, and wheat-based dishes felt instantly familiar to Ali and gave him confidence in his venture. 'Foreign and Chinese entrepreneurs are treated equally here. The process for business registration, food service licensing, and other formalities is highly efficient and convenient,' Ali emphasised, adding that the friendly business environment made it possible for the smooth opening of his restaurant. In fact, China has been actively improving its business climate nationwide. Government departments are working to offer high-quality services to support foreign investors. Thanks to the favorable local policies, Ali secured all necessary permits including different licenses and certifications within a month. Over the past six months, the business had exceeded expectations, with daily revenue surpassing 20,000 yuan (about US$2,780). According to Ali, the restaurant attracts diverse customers, including international students from Pakistan, Iran, India, and Saudi Arabia, alongside curious young Chinese foodies drawn by its growing reputation. But for Ali, this is just the beginning. The ambitious businessman is now preparing to open another restaurant in Hainan, China's southernmost province, next month. Inspired by the potential of Hainan Free Trade Port, Ali sees the island as a gateway to global opportunities and a new base for sharing South Asian cuisine. 'My dream is to bring South Asian delicacies to people in every province of China. 'This is my way of deepening our bilateral friendship between our two countries,' Ali said, crediting China's welcoming environment and streamlined business policies that helped to turn his vision into reality. – Xinhua China culinary South Asian Xinhua

Bursa up as investors welcome trade framework
Bursa up as investors welcome trade framework

The Star

time2 hours ago

  • The Star

Bursa up as investors welcome trade framework

At 5pm, the FBM KLCI rose 6.89 points, or 0.45% to 1,523.84 from Tuesday's close of 1,516.95. KUALA LUMPUR: Bursa Malaysia ended higher yesterday, with investors adopting a cautiously optimistic stance following the announcement of a United States-China trade framework agreement, which includes provisions on technology trade. At 5pm, the FBM KLCI rose 6.89 points, or 0.45% to 1,523.84 from Tuesday's close of 1,516.95. The benchmark index opened 3.91 points higher at 1,520.86 yesterday morning, which was its day's low, and subsequently moved to a high of 1,530.85 in the early session. On the broader market, gainers thumped decliners 545 to 375, while 528 counters were unchanged, 921 untraded and 11 suspended. Turnover soared to 3.27 billion units worth RM2.59bil compared with yesterday's 2.72 billion units worth RM2.09bil. UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan told Bernama that the development in the US-China trade negotiations marks a constructive step toward de-escalation, although it falls short of a material breakthrough. Domestically, the market found additional support from encouraging macroeconomic data, with figures released yesterday by the Statistics Department showing that the sales value of the manufacturing sector rose by 4.8% year-on-year in April 2025, reaching RM160.6bil. — Bernama

Deal ‘is done', says Trump, as China and US trade truce gets back on track after London talks
Deal ‘is done', says Trump, as China and US trade truce gets back on track after London talks

The Star

time3 hours ago

  • The Star

Deal ‘is done', says Trump, as China and US trade truce gets back on track after London talks

BEIJING: China and the United States agreed to revive a fragile trade truce after two days of talks in London, further defusing tensions between the two geopolitical rivals. US President Donald Trump said on Wednesday (June 11) that the deal with China 'is done' and that the relationship was 'excellent'. Hours earlier, Chinese Vice-Premier He Lifeng, who led the negotiating delegation in London, called on the US to 'stay true to your words', and 'demonstrate good faith in keeping promises'. The agreement, which concluded close to midnight on June 10 in London, followed a roller coaster of rising and easing tensions over non-tariff measures, after both sides agreed in May in Geneva to a 90-day truce that sharply lowered tariffs on each other's goods. The main sticking points since May were Beijing's restrictions on rare earth exports to the US and Washington's curbs on the export of chip design technology to China. In a Truth Social post, Trump said full magnets, along with any necessary rare earth minerals, will be supplied upfront by China. In return, the US will provide to China 'what was agreed to', including allowing Chinese students to attend colleges and universities in the US, which he noted 'has always been good with me!'. Separately, US Commerce Secretary Howard Lutnick told reporters that the 'framework' reached in London puts 'meat on the bones' of the Geneva agreement, adding that it will still need approval from both leaders. He said Chinese restrictions on rare earth minerals and magnets and some of the recent US export restrictions would be removed 'in a balanced way' but did not provide details. China's Vice-Commerce Minister Li Chenggang told reporters after the talks that both countries had agreed on a framework to implement the consensus that Chinese President Xi Jinping and Trump had reached after a June 5 phone call, as well as May's trade truce. He described the talks as in-depth, professional, rational and frank. 'The progress achieved at the London talks is beneficial to enhancing trust between the two countries, advancing the healthy and stable development of China-US economic ties, as well as provide positive energy to the global economic development,' Li said. Analysts saw the latest talks as positive. Professor Wu Xinbo, director of the Centre for American Studies at Shanghai's Fudan University, said he expects the US to roll back the non-tariff measures threatened or imposed on China after the Geneva talks, such as revoking visas of Chinese students studying in the US. 'As for the Chinese side, it may accelerate the process of rare earth exports to help resolve the urgent needs of the Americans,' he said. The May agreement was derailed on June 1 when the US accused China of 'slow-rolling' licences for exports of rare earths, which are critical in the production of cars, chips and other products. China dominates the world's rare earth supply chain, accounting for nearly 70 per cent of the global mining output and processing about 90 per cent of the total supply – a trump card Beijing has cultivated for decades. However, economist Bert Hofman noted that China's delay in rare earth export licences was partly due to 'bureaucratic inertia'. 'The process was cumbersome and brought issues for industries around the world, not just for the US. So it was not specifically targeted at US companies,' he said. Washington, meanwhile, activated its own levers on China. On May 29, it announced the revocation of visas for Chinese students and issued export control guidelines for AI chips, as well as effectively halting sales of chip design software to China. Chinese tech firms that design chips rely on such foreign software, known as electronic design automation. China's Ministry of Commerce on June 2 criticised these measures as discriminatory and accused the US of violating the consensus of the Geneva talks. Just as all the signs pointed to the breakdown of the truce, the June 5 call between Xi and Trump was widely seen as having reset fraught relations. This was followed on June 7 by China's Ministry of Commerce's announcement that it had approved a number of applications for rare earth exports, and will continue to strengthen the approval process for such applications. Even as the London talks were ongoing, Beijing strategically underscored its resilience. In a front-page interview on the official People's Daily on June 10, Huawei founder Ren Zhengfei discussed China's technology and research capabilities, particularly in chips. The Chinese telecommunications equipment giant has emerged as a national champion for areas such as AI chips called the Ascend processors, which Washington has recently warned other countries against using. Asked how he feels about Huawei being under a blockade, Ren said: 'Don't think about the difficulties – just do it, one step at a time.' - The Straits Times/ANN

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store