Reshaping global trade: The rise of South-South corridors

Closer economic ties between fast-growing developing markets are transforming flows of trade and capital.

Briefing 2: South-South corridors

July 22, 2025

6 mins

Corporate & investment banking

South-South trade and capital flows are emerging as the defining forces in the global economy. As developing markets seek new growth engines and trade flows become more diversified, economic ties between Asia, Africa, the Middle East and Latin America are deepening, giving rise to increasingly influential corridors of growth.

Broadly defined as the exchange of goods, services and capital between emerging and developing economies, South-South corridors have expanded rapidly in recent years. In 2023, South-South trade in goods reached USD5.7 trillion and accounted for 24 per cent of global trade, up from 21 per cent in 2022 and 15 per cent in 2005. Trade between emerging markets and developing economies (EMDEs) grew significantly between 2001 and 2023, with intra-EMDE trade accounting for 61 per cent of total EMDE trade.

This growth has been accompanied by upward trends in capital flows. Since the start of the century, for example, foreign direct investment (FDI) between EMDEs has grown faster than FDI between advanced economies. Investment from G20 EMDEs to others has also been steadily rising as a total proportion of EMDE investment overseas, climbing from 8 per cent to 15 per cent in two decades.

South-South trade is one of the key growth engines for the world and the potential for the future is immense.

P.D. Singh

CEO & Head of Coverage, India and South Asia, Standard Chartered

Alternative trade routes

Global trade is undergoing a significant transformation as companies move away from traditional routes to mitigate risks associated with tariffs, trade disruption and geopolitical tensions.

For example, the share of total US imports from China fell from 22 per cent in 2018 to 14 per cent in 2023, and in sectors such as electronics, the reduction was even more pronounced. Meanwhile, rising shipping costs and increasing global trade restrictions have accelerated the shift towards alternative trade routes.

China has emerged as the anchor, exporting more to emerging markets, while emerging markets have, likewise, shifted their exports towards China, particularly in Sub-Saharan Africa and Latin America.

Regional trade agreements are also gaining momentum. South-South trade alliances are deepening through initiatives such as the African Continental Free Trade Area, ASEAN, Regional Comprehensive Economic Partnership (RCEP), and the India-Middle East-Europe Economic Corridor. RCEP alone is forecast to add USD245 billion each year to regional income by 2030 and the BRICS+ bloc, now including key Global South economies, is expected to account for 44 per cent of China’s total trade growth over the next decade.

Outside formal agreements, emerging trade corridors are expanding, including Asia-Latin America, Middle East–Sub-Saharan Africa and China-Middle East, underscoring how geopolitical shifts and infrastructure investment are redrawing the trade map.

Emerging markets are also evolving into major consumer hubs. Rapid middle-class growth across the Global South is fuelling demand for consumer goods, technology and services.

Renewables and sustainability

Infrastructure investment continues to underpin these shifts, including energy projects reshaping commodity markets and fostering greater integration among South-South economies.

Cross-border investment in green energy and critical minerals is accelerating, supported by major initiatives and high-level platforms such as the International Commodity Summit 2025 and South Africa’s G20 Presidency. This is advancing regional energy cooperation and positioning South-South economies as key players in the global energy transition.

This momentum aligns South-South trade more closely with global environmental, social and governance priorities, particularly in renewable energy, sustainable finance and the development of critical mineral supply chains.

China, for example, is increasingly investing in renewables projects in Africa, with a fifth of its renewable energy FDI and construction activity since 2010 taking place on the continent. Initiatives include the Africa Solar Belt Program, with China providing USD14 million to supply 50,000 African households with solar power.

Cross-border connectivity projects, such as the ASEAN Power Grid and an initiative between Bangladesh, Bhutan, India and Nepal, meanwhile, promise to help countries address issues such as seasonal energy scarcity and accelerate the adoption of clean power technologies.

Unlocking the opportunities

South-South trade growth is projected to outpace global trade, led by higher-value sectors, including electronics, chemicals and automobiles, reflecting the growing capacity of developing economies to move up the value chain.

These forces are creating significant opportunities. Multinational corporations can gain access to fast-growing consumer markets, diversify their supply chains and reduce their exposure to the geopolitical tensions affecting major North-South routes.

Investors are attracted to high-growth sectors, including technology, infrastructure and sustainable industries that offer access to relatively untapped markets. For governments and NGOs, South-South partnerships are proving instrumental in promoting economic diversification, industrialisation and sustainable development.

The next chapter

Underpinned by favourable demographics, infrastructure investment and growing regional integration, South-South trade is poised for sustained and robust growth. By 2033, trade among Global South nations is expected to reach nearly USD14 trillion annually, expanding at 3.8 per cent per year, compared with the 2.2 per cent rate of North-North trade.

South-South trade is set to remain the fastest-growing segment of global commerce, offering businesses and investors access to relatively stable, resilient and high-growth markets.

South-South investment, too, looks set for continued growth, albeit at a more moderate level amid global risks and uncertainties. Africa, the Middle East and ASEAN nations are all seeing a rise in FDI despite global headwinds. And five Asian economies, namely Japan, China, Hong Kong, Singapore and South Korea, rank among the top 10 sources of FDI outflows, underscoring the region’s key role as a global investor.

Banks have a critical role to play in equipping businesses with the funding and tools needed for cross-border trade and investment. With deep expertise and a strong presence across key South-South trade routes, we help clients navigate complex markets, manage risks and tap into sustainable growth opportunities.