China’s widening trade surplus with emerging markets has become a defining feature of global commerce in 2025, driven by slowing demand in the West, persistent industrial overcapacity, and attempts to circumvent US tariffs.

Yet this boom, particularly in exports to countries across Asia, Latin America and the Middle East, is increasingly at risk as political and trade pressures mount, according to William Jackson, chief emerging markets economist at Capital Economics, said in a note.

“Emerging markets have played a key role in China’s export boom for some time,” Jackson noted. “But in the first half of 2025, their significance has grown further.”

He estimated that while emerging markets (EMs) accounted for around 70% of China’s export growth between 2019 and 2024, they made up nearly 90% of the $100bn year-on-year increase in the first half of 2025.

Simultaneously, China’s imports from EMs have fallen, largely due to softer commodity prices, widening its trade surplus with the developing world.

“On our estimates, China’s trade surplus with EMs overtook that with developed markets in the second quarter,” Jackson said.

Russian President Vladimir Putin is making a similar bet on the Global South Century. After going to war with Ukraine it was obvious that the West would sanction Russia and cut trade ties. Putin has calculated that he can replace the formally dominate EU trade with new partners in the flourishing markets of the Global South – and so far his bet seems to be working; Russia managed to reorientate its entire oil exports to Asia in a matter of months, following the imposition of the EU’s twin oil sanctions on Russia at the end of 2022.

Part of China’s increasing EM trade reflects re-routing of goods through third countries to bypass US tariffs. China’s exports to traditional trans-shipment hubs such as Vietnam, Malaysia and Thailand have surged, suggesting a growing reliance on indirect pathways to reach the American market. “Exports to some of the traditional conduits for trans-shipments to the US... have risen particularly sharply,” Jackson observed.

However, the trend is not limited to tariff evasion. The export gains have been geographically broad-based, with China expanding shipments to roughly 75% of EMs during the first half of the year. Notably, countries in the Middle East and Latin America — which are not typically re-routing hubs — have emerged as significant growth markets. This indicates that Chinese producers are actively seeking new end-user demand in emerging economies.

The range of industries involved spans both high and low value-added sectors. “Brazil and Mexico, for example, are now among China’s largest export markets for autos,” Jackson said. At the other end of the spectrum, exports of textiles and basic manufactured goods have also increased, posing a challenge to the traditional development model pursued by many EMs — moving up the value chain through domestic industrialisation.

Jackson described China’s export push as being structurally driven by its domestic growth model, “based on high investment and low consumption.” This has left the country with persistent industrial overcapacity and a need to offload surplus production abroad.

Yet the strategy is encountering growing resistance. “Chinese exporters are likely to face growing barriers in (at least some) EMs,” Jackson warned. The Trump administration’s renewed focus on curbing trans-shipments is expected to feature prominently in trade negotiations with emerging economies.

Moreover, domestic political pressures are intensifying. “The likelihood and nature of a response will vary across countries,” Jackson said. “India is one clear candidate to put up trade barriers to protect domestic industry, while EM commodity producers are more likely to refrain from responding.”

While China’s export machine has found temporary momentum in the developing world, its long-term sustainability may hinge on how far emerging economies are willing — or able — to absorb the political and economic consequences of an imbalanced trade relationship.