The Global South in the wake of China's economic surplus: Industrial challenges for developing countries and policy recommendations for the EU

Abstract

As the global economic landscape shifts, China’s industrial overcapacity is intensifying trade imbalances, posing significant challenges for developing countries. While the US is scaling back its development cooperation under USAID and the EU faces criticism for its Carbon Border Adjustment Mechanism (CBAM), China is actively positioning itself as a key economic partner for the Global South. Its Global Development Initiative and recent announcement of zero tariffs for least-developed countries aim to reinforce this narrative. However, China's growing trade surplus in the manufacturing sector raises pressing questions about the sustainability of these economic relationships. The author examines the impact of China's economic surplus on industrial development in the Global South and the role the EU can play in mitigating its effects. The study highlights how Chinese exports - particularly in green technology, machinery and basic manufacturing - are outcompeting local industries, potentially hindering long-term industrialisation efforts. While middle-income countries like India, Brazil and Argentina have implemented defensive trade measures, lower-income nations often lack the capacity to respond effectively. To counterbalance China's dominance, the EU must adopt a strategic approach, supporting trade resilience and industrial growth in the Global South. By strengthening partnerships, promoting diversified trade networks and investing in local supply chains, the EU can play a crucial role in fostering sustainable and balanced global trade relations. This policy brief expands on the broader debate around China's economic influence, trade resilience and global development cooperation.