An intriguing new report published by the Centre for Economic Policy Research outlines the increasing importance and weight of Global South countries in finance. According to the report, investments involving the South, and especially those within the South, have grown faster than those within the North.
Its definition of Global South follows that of the United Nations Conference on Trade and Development (UNCTAD), broadly comprising Africa, Latin America and the Caribbean, Asia excluding Israel, Japan, and South Korea, and Oceania, excluding Australia and New Zealand. The dataset allows close comparison between subregions and demonstrates which Global South areas are growing most strongly. But the report points out that these trends are common across South subregions and are not driven by faster economic growth. So there is clearly more at work than just the rising tide of economic growth.
According to figures from the International Monetary Fund and UNCTAD, the South accounted for roughly 45% of world gross domestic product by 2018, a share that has only grown since then. In particular, growth of investments involving regions of the South grew faster than those in regions of the North, and intra-regional investments between the regions of the South tended to grow more rapidly than those within the same South regions. This implies growth in regional trade networks and the increasing integration of the Global South, a thesis which can still play into trends of deglobalisation and regionalisation of the macroeconomy.
The report provides considerable comfort to those worried about mounting macro and geopolitical risks associated with China, noting that “growth of international investments involving China is not very different from that involving other South regions”.
“In fact, Africa is the region with the fastest growth in portfolio investment and FDI, and Eastern Europe and Central Asia is the region with the fastest growth in loans and deposits,” it says. That should call for some hard thinking and perhaps repositioning among investors concerned about risky overexposure to China.
Needless to say, these encouraging figures do not mitigate risk entirely. But in an increasingly unpredictable world where no region is immune from geopolitical uncertainty, the Global South perhaps deserves a reappraisal based on solid data rather than past prejudices.
