China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

SCO – another example of Chinese long-term strategy

September 3, 2025

The Shanghai Cooperation Organisation (SCO) belongs to the international conventions that are hardly known in our part of the world. Though having been founded already in 2001, not very much has been reported from the 24 Heads of State Council meetings before the 25th SCO convention that took place recently in Tinjian.  The SCO Tianjin Summit 2025 has probably been the most important of its kind so far, due to the list of prominent participants and the burning international conflicts.

Long-term aspects more important than short-term results

Shanghai Cooperation Organization (SCO), is an intergovernmental organization that has been started in 2001 by China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan aiming at peace and cooperation among its member states with the intention to promote what then was called a new fair political and economic order. Later on, also India, Pakistan and Iran joined the organization.

Totally, the SCO also includes quite a number of observer states from the Eurasian region. Around half of the global population is represented in the SCO which considers itself as an alternative to corresponding Western organizations .

According to the SCO, its main goals are defined as follows:

#  “to strengthen mutual trust, friendship and good-neighborliness between the Member States;

#  to encourage the effective cooperation between the Member States in such spheres as politics, trade, economy, science and technology, culture, education, energy, transport, tourism, environmental protection, etc;

#  to jointly ensure and maintain peace, security and stability in the region; and

# to promote a new democratic, fair and rational international political and economic international order”.

When reading these points above, one can easily observe their general and unbinding character – whatever this may mean. But now more co-operation among the member countries seems to be strived. This would allow China – the strongest member of the SCO – to pave the way for the continued development of the SCO (see https://www.chinadailyhk.com/hk/article/618965), certainly in line with its international long-term strategy. A parallel long-term strategy of this kind is also visible in other parts of the globe, for example in Africa, South America and the Pacific area. Russia’s role in the SCO seems to remain limited compared to China’s dominant position. India’s future impact on the SCO still appears unclear but closer relations to China seem to be on the cards. Trump’s tariffs could favor such a development even more than so far.    

Conclusion: China’s interest in the future of the SCO underlines again its long-term ambitions in the world – for reasons of political influence, new markets for its exports and the future supply with important commodities. By looking somewhat deeper into the SCO, we have got another example of China’s unique capacity to apply both short-term and long-term perspectives at the same time. A phenomenon that uses to come back regularly and that often is neglected in Western countries and companies..

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

U.S. tariff developments remain important to many emerging markets

August 21, 2025

Many emerging markets and less developed countries are closely linked to the development of the United States; according to my own definition emerging markets have taken more structural steps in a promising direction than all the clearly lagging developing countries in the world. Growth and market potential is simply more favorable in emerging economies.

This is why Western investors, financial and academic analysts often emphasize on emerging economies. I myself have been doing this for many years at Linnaeus University. Many analytical tools for the studies of emerging markets are similar to those being applied to advanced countries – but quite a number of these analytical tools are also different or have to be used additionally. For example, institutional conditions like transparency and the quality of statistics or ethics are different. But also the interpretation of widely published statistics – such as for GDP growth and inflation – differs normally between developed and less developed countries for the same statistical number.  

Examples of emerging countries are – when quoting the IMF (see https://www.imf.org/en/Publications/WEO ) – in alphabetical order: Argentina, Brazil, Chile, China, Colombia, Egypt, India, Indonesia, Kazakhstan, Lebanon, Malaysia, Mexico, Nigeria, Peru, the Philippines, Russia, South Africa, Turkey, and the Ukraine. So much in general terms.

Strong impact of the U.S. on emerging markets’ exports    

As much as one sixth of total exports from the emerging and developing world goes these days to the U.S. Many of these countries are, particularly hit by raised U.S. tariffs – also since tariffs for many of these countries have been raised unevenly. This could mean new conditions for competition.

Emerging countries for which the U.S. is the main market for their exports are listed in the following table (https://www.cia.gov/the-world-factbook/field/exports-partners/). One could find there in 2023, for example, the U.S. as the number one export market for Mexico (76 % of total exports), Cambodia (36 %), Vietnam (28 %), Columbia (27% ), Sri Lanka (22 %), Ecuador (22 %), India (19 %), Thailand (18%), Bangladesh (16 %), Kenya (10 %) and as the number two market for Chile (16 %), Peru (14 %), The Philippines (13 %), Malaysia (12 %), Brazil (10%), Indonesia (9 %) and South Africa (8 %) among others.

Conclusion:  When looking at the tariffs that have been (preliminarily?) implemented by President Trump (see https://dimerco.com/news-press/us-tariff-update-2025/ ), one can recognize that the emerging markets quoted above (and many others) are heavily hit by the American protectionist tariffs – meaning a negative impact on the potential output of these emerging countries. Logically, the less developed countries are hoping that (more) free trade will come back not too far away – and so do many Western corporations which could benefit themselves from better export conditions of emerging countries to the U.S. Such a development would improve GDP growth in emerging countries and their future  inflow of new U.S. dollars for widened imports – and, thus, create improving Western market conditions in parts of the emerging market area as well.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

The EU-Mercosur free trade agreement – welcome but not without problems

December 9, 2024

The EU and the five active Mercosur countries – Brazil, Argentina, Uruguay, Paraguay and since recently Bolivia – finally made it, quite surprisingly when the trade deal with the EU really happened; highly desired by many corporations – but it took 25 years of trade talks to get there (https://ec.europa.eu/commission/presscorner/detail/en/qanda_24_6245). Initial reactions were mostly positive but not unisono. A number of obstacles for a good development of the agreement still have to be eliminated or improved, both in the short and the longer run.

Some (still) opposing EU countries

It is generally expected that the new free-trade agreement will be particularly beneficial to EU countries when it comes to the export of investment goods, cars, pharmaceuticals, many services and other products with currently high tariffs. For Mercosur countries, particularly exports of agricultural products and critical minerals to the EU promise to become more attractive – however, some EU countries with still large agricultural production certainly dislike the new trade agreement. Altogether, there are particularly three striking problems to be tackled.

Problem no 1: To get the EU to join the deal

It certainly won’t be an easy call to convince reluctant EU countries with a relatively high share of agricultural production such as France, Italy, Poland and the Netherlands to join the agreement with Mercosur. This trade agreement must be approved by 15 of the 27 EU states which totally must represent 65 percent of the whole EU population. A simple majority by the European Parliament is also needed.

Problem no 2: Exaggerated expectations directly after such a deal.

I remember quite well the strongly positive expectations for mutual trade gains from previous (free) trade agreements that covered other geographic areas. However, in most of these cases very positive predictions never came true or it took a long time until major achievements could be noticed. For example, the big Southeast Asian & Pacific trade deal by the name of Regional Comprehensive Economic Partnership (RCEP, https://crsreports.congress.gov/product/pdf/IF/IF11891) from 2020 still remains quite unobserved; despite the fact that the member countries – with China on the top – stand for almost 30 percent of global GDP.  Limited enthusiasm for the RCEP can be particularly referred to poor customs administration, delivery delays and lack of transparency. Thus, a main objective for the EU-Mercosur agreement should therefore focus on acceptable or good institutional conditions. This may be difficult.

Problem no 3: Economic imbalances and weak growth in Mercosur countries

When looking at the two largest Mercosur countries – Brazil and Argentina – they have been characterized by really disappointing growth performances in the past decades, Argentina even more than Brazil. Varying changes of economic policy regimes have not helped so far. Both countries have been underperforming during many years. Thus, potential growth is quite low in Mercosur countries. Reforms of the institutional framework are badly needed. The EU – Mercosur deal may hopefully speed up necessary improvements, also when it comes to productivity.

Summary: The EU-Mercosur agreement can be interpreted as an important signal to the opponents of free trade – but has its limits due to Brazil’s and Argentina’s insufficient growth performance. Hopefully, future policy changes will improve the growth outlook.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University