SFC Correspondent Zheng Qingting, Intern Mu Rongxuan in Tianjin
China is set to transform the global trade landscape through its deepening economic ties with the Global South, as outlined by Aparna Bharadwaj, BCG Managing Director & Senior Partner, in an interview with Southern Finance. BCG’s global trade model forecasts that trade between China and regions like ASEAN, Africa, and Latin America will grow at approximately 6% per year—twice as fast as the global trade growth rate of 2.9% annually.
In the realm of innovation, China is transitioning from high-speed growth to high-quality development, with artificial intelligence (AI) emerging as a key growth engine. Bharadwaj emphasizes China’s ability to reduce the cost and timeline of innovation, particularly in AI, where it is closing the gap with the US. With 20 gigawatts of computing power, a surge in STEM graduates, and $170 billion in combined private and government-backed investments, China leads in highly cited AI publications and is pioneering “good enough” AI solutions using older semiconductors. This cost-effective innovation model, exemplified by products like DeepSeek and Qwen, positions China as a formidable AI superpower alongside the US.
To capitalize on these opportunities, BCG advises Chinese companies to expand aggressively into Global South markets, where their innovative, cost-competitive products can thrive. Bharadwaj also stresses the importance of building resilience to navigate global volatility. She recommends incorporating buffers in supply chains, inventories, and timelines to mitigate risks from geopolitical shifts and unforeseen events.
SFC Markets and Finance: China's economic ties with the Global South are deepening. How do you assess the strategic significance of these ties in reshaping global trade flows? How is this influencing the global expansion strategies of Chinese companies?
Bharadwaj: You are correct that global trade flows have been evolving for some time. This trend has been ongoing for the past 8 to 10 years. One key development is that trade between the US and China has been declining over recent years, while trade between China and other Global South countries has grown rapidly. At BCG, we developed a global trade model to forecast the next decade. Our findings include several key insights. First, we project that trade between China and other Global South countries will grow at approximately 6% per year, twice as fast as global trade, which is growing at about 2.9% annually.
Second, South-South trade—trade among Global South countries—is emerging and expected to grow at over 5.6% per year. These are the new trade corridors being formed. Additionally, the BRICS coalition is expanding. If Saudi Arabia joins, BRICS will represent a significant share of global population, GDP, and oil production, amplifying its influence as a voice for the Global South. Overall, we see strong integration between China and the Global South, fostering increased South-South trade.
SFC Markets and Finance: As China transitions from high-speed growth to high-quality development, emerging industries like AI, green energy, and digital finance are gaining prominence. Which of these do you see as the most potent growth engines, and how is BCG advising companies to capitalize on these opportunities?
Bharadwaj: This is a highly relevant question. Chinese businesses excel at reducing the cost and timeline of innovation across various sectors. For this reason, I’m particularly interested in how AI innovation is evolving in China. In our publication, The Geopolitics of AI, we identify two AI superpowers: the US and China, alongside several AI middle powers like Europe and the UAE. The US leads in AI due to over $200 billion in R&D, global talent, and over 45 gigawatts of computing power. However, China is rapidly closing the gap, with approximately 20 gigawatts of computing power and a growing pool of STEM graduates. China also leads in the number of highly cited AI publications and is advancing in AI-related intellectual property.
Private sector investment in Chinese AI has reached $60 billion over the past four to five years, supplemented by $110 billion from venture capital, including government-backed funds. This positions China to continue narrowing the gap in AI development. Notably, China has achieved what I call “good enough” innovation in AI, leveraging older semiconductors to create effective solutions like DeepSeek, Qwen, and other products. Among the sectors you mentioned, AI stands out as a key area of interest for innovation in China. In green technology, China maintains a strong leadership position alongside Europe and the US, particularly in solar, wind, and renewable energy investments. While I’m less specialized in green tech, it’s clear that China’s continued investment gives it a competitive edge.
SFC Markets and Finance: You mentioned that China and the US are the two AI superpowers. How do you see the similarities and differences in their AI ecosystems?
Bharadwaj: The US and Chinese AI ecosystems differ significantly. In the US, AI R&D is primarily driven by big tech companies in the private sector, which protect their intellectual property to gain a first-mover advantage. In China, AI development is fueled by a mix of private sector investment and substantial public sector support, including government-backed venture capital. Another difference lies in the role of universities. China’s AI ecosystem is anchored by institutions like Tsinghua University, which collaborates closely with the private sector to foster innovation. In contrast, the US ecosystem relies more on large corporations and private investment.
A third distinction is China’s ability to innovate with lower budgets and less advanced semiconductor technology. For example, solutions like DeepSeek achieve “good enough” outcomes using older semiconductors, delivering results comparable to US innovations but with fewer resources. Both ecosystems have unique strengths, shaped by their distinct approaches to funding, institutional collaboration, and technological constraints.
SFC Markets and Finance: Given the unique features of China’s AI ecosystem, how is BCG advising Chinese companies to capitalize on these opportunities?
Bharadwaj: My first piece of advice for Chinese businesses is to expand their presence in Global South markets. Chinese innovative products, including consumer goods, have significant potential in these regions, creating a win-win scenario. Second, I recommend continuing to drive low-cost innovation, which enables products to be accessible in markets with lower consumer purchasing power, such as emerging markets in Asia and elsewhere.
Additionally, as the head of BCG’s globalization practice, I emphasize the importance of building business resilience. Global volatility and complexity are increasing and likely to persist for years. Businesses should incorporate buffers in inventory, timelines, and supply chains to mitigate risks and handle unforeseen events like black swan scenarios. In the past, such buffers might have been seen as inefficiencies, but today, they are critical for resilience.
Finally, I advise Chinese businesses—and global businesses alike—to develop what I call a “geopolitical muscle.” This involves two components: first, a radar to monitor and anticipate global policy shifts; second, a geopolitical command center—a dedicated team to assess the impact of geopolitical changes on profit and loss, business operations, and risks. This enables businesses to pivot strategically in response to geopolitical developments. By building this capability, Chinese companies can better navigate the complex global landscape.
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