Chinese companies are winning the Global South

Their expansion abroad holds important lessons for Western incumbents.

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Since the end of the Cold War, the rich world's corporate giants have been the dominant force in global commerce. Today, consumers and workers in almost every country are touched in some way by the world-spanning operations of multinational firms from America, Europe and, to a lesser extent, Japan.

These leviathans are now under threat, as Chinese firms in industries from cars to clothing expand abroad with startling speed. A new commercial contest has begun. Its battleground is neither China nor the rich world, but the fast-growing economies of the Global South.

The expansion of Chinese business is taking two forms. One is through globalised supply chains. Greenfield foreign direct investment by Chinese firms tripled in 2023 to US$160 billion (S$212.3 billion). Much of that was spent building factories in countries from Malaysia to Morocco.

Less noticed is the fact that Chinese firms are also pursuing the five billion consumers who live in the rest of the developing world. Since 2016, listed Chinese firms have quadrupled their sales in the Global South, to US$800 billion, and now sell more there than in rich countries. For the West, attempting to deal with China's rise, that holds uncomfortable lessons.

Chinese businesses are looking abroad partly because of slowing economic growth and ferocious competition at home. They are chipping away at the dominance of incumbent multinationals everywhere from Indonesia to Nigeria. Transsion, an electronics firm, produces half of the smartphones purchased by Africans. Mindray is the leading supplier of patient-monitoring systems in Latin America.

Chinese makers of electric vehicles (EVs) and wind turbines are expanding in the developing world, which also happens to be home to nine of TikTok's 10 biggest markets.