Xi's charm offensive cuts both ways in the Global South

AllAfrica

29-07-2025

Chinese President Xi Jinping is on an economic charm offensive across the Global South's emerging markets. As tensions with the West escalate and economic headwinds gather at home, China's president has turned to emerging markets with promises of investment, infrastructure and deeper trade ties.
From Southeast Asia to the Gulf, Chinese officials have been busy striking deals and hosting summits, pitching Beijing as a stable, pragmatic alternative to a more unpredictable United States.
A notable example of this offensive is Chinese Premier Li Qiang's attendance at the Gulf Cooperation Council (GCC)–ASEAN summit in May 2025, which aimed to 'offer vast opportunities to synergize our markets, deepen innovation, and promote cross-regional investment.'
Notably, Beijing opted to attend the summit instead of the Asia-Pacific-focused Shangri-La Dialogue, where the US and its allies regularly criticize China over its security practices. This development underscores Beijing's policy preference shifting away from fighting the rhetoric about its territorial disputes to crafting a narrative about China as an alternative economic partner amid global disapproval of Washington's trade policies.
Washington's ongoing tariff war has dented China's economic confidence, with metrics such as retail sales and fixed-asset investment both slightly underperforming in April 2025, according to Dutch bank ING. Amid this uncertainty, Xi's diplomatic appeals appear to be garnering a warm reception amongst emerging economies.
A study by Australia's Griffith University and the Green Finance & Development Center in Beijing found that Chinese construction contracts and investments in Belt and Road Initiative (BRI) countries totalled US$124 billion in the first half of 2025, up slightly from $122 billion the previous year. The BRI is a program through which Beijing and Chinese firms fund or build infrastructure across the world.
This new BRI activity will likely contribute to China's macroeconomic strength by helping improve its real GDP growth. For example, the initiative has shifted from sovereign lending to foreign direct investment (FDI), which may help ease concerns about China's mounting sovereign debt exposure.
However, behind the diplomatic fanfare lies a more fragile reality. China's sluggish internal growth continues to weigh heavily on Beijing and will likely curtail any lasting benefits from Xi's charm offensive. Indeed, the BRI expansion was largely prompted by 'slow domestic growth and the need to diversify supply chains and markets due to the trade war sparked by Trump's tariffs.'
However, China's cooling economy, rampant overcapacity concerns and faltering demand amongst domestic consumers paint a bleak picture for potential Chinese trading partners.
According to 2025 second-quarter data released by Beijing, the country's real economic growth remained steady at 5.2% year-over-year (YoY). However, nominal growth, which reflects what companies actually receive in revenue and workers in wages, was significantly weaker at 3.9% YoY. This gap highlights a broader and persistent trend: the decline of China's middle class.
China's middle class has historically served as both the driving force behind and primary beneficiary of the country's economic growth. But now, 40% of that group has seen their wealth decline in recent years, particularly among the younger generations.
The traditional markers of a secure middle-class life, a stable job in the public sector or in industries like tech and finance, home ownership and upward mobility, are in decline.
The free fall of China's property market has been especially damaging, given that most middle-class wealth is tied up in real estate. Coupled with the country's harsh 996 work culture, many young Chinese are now questioning the socio-economic values that once propelled China to global prominence.
This generational shift has produced a 'tang ping' or 'lying flat' mentality. This mentality shift is marked by a retreat from conspicuous consumption and a preference for domestic over imported goods.
This shift in consumer habits poses a challenge for Xi's efforts to deepen trade with emerging economies. On one hand, Chinese firms benefit from new markets to sell goods and services. On the other, China's shifting domestic market no longer offers its partners reciprocal opportunities.
The one-sided nature of this emerging economic model may give countries like those in ASEAN pause. This will be particularly true as these emerging markets come under increased scrutiny from the US and EU for their deepening integration into Chinese supply chains.
As a result, emerging economies are likely to remain cautious about further integration with China unless there are clear signs of an improving domestic outlook. Yet such signs are increasingly difficult to detect as Beijing continues to obscure information about its socio-economic health.
Analyses of China's National Bureau of Statistics have discovered that the agency has ceased publishing several key indicators, including unemployment and land sales data. This deliberate suppression of information comes amid rising speculation that Beijing has overstated its actual economic performance.
This question about China's socio-economic health was raised in December 2024 when Gao Shanwen, chief economist at state-owned State Development and Investment Corporation (SDIC) Securities, publicly stated that real economic growth in China 'might [have been] around 2%' in recent years.
Gao's remarks – which contradicted China's official narrative – led to his being 'disciplined' by Xi and banned from making further public comments. The episode highlights two critical concerns for emerging markets considering deeper ties with China.
First, while China remains the world's second-largest economy, the health of its domestic market is potentially far less robust than Beijing portrays. That makes China a less attractive long-term investment opportunity, particularly as Chinese consumers increasingly favour domestically made products over foreign imports.
Second, the Gao incident underscores a broader trend: Beijing's readiness to suppress dissent. More worryingly for foreign businesses, this supression may not just be targeted at domestic citizens but potentially foreign investors as well.
Historically, the aforementioned repression targeted Chinese nationals and local businesses. But recent signs suggest that foreign executives are no longer immune.
In one recent high-profile case, a Japanese pharmaceutical executive was sentenced to three and a half years in prison on espionage charges. This executive spent more than two decades in China and was active in the Japanese Chamber of Commerce in China.
Other Japanese citizens have been held on espionage charges prior to this incident. However, the timing of the arrest, amid US-spurred efforts for Tokyo to economically decouple from Beijing and China's own military provocations, raises alarms.
It suggests that as geopolitical pressure mounts, China may increasingly use its opaque legal system as a tool of coercion to ensure new and old trading partners do not drift from China's sphere of influence.
This presents a broader risk if, for example, Trump intensifies efforts to push emerging economies seen as enabling the sale of cheap Chinese goods into the US, like Vietnam, to distance themselves from Beijing.
Trump could use his tariff diplomacy style to force these emerging economies to make economic choices that are not necessarily in their own interests. In turn, China may respond by targeting foreign businesspeople in retaliation, using its opaque legal system to reinforce political-economic loyalty and prevent strategic drift.
Against this increasingly tense backdrop, Xi's charm offensive may generate photo ops and pledges of cooperation. But it does little to address the deeper weaknesses at the heart of China's economic and political system.
A shrinking middle class and an increasingly politicized business environment all point to a system under strain. The trade and investment opportunities Beijing offers may look appealing on the surface, but they come with conditions and risks that emerging economies would be wise to scrutinize carefully.
Unless China undertakes serious domestic reform and opens its economy in good faith, those enticed by its charm offensive may find themselves entangled in unequal and unstable partnerships with more to lose than to gain.
Hans Horan is a strategic analyst at the Hague Centre for Strategic Studies (HCSS) think tank, specializing in the Indo-Pacific, cyber threat intelligence, and security and defense affairs. He previously worked for over seven years in the intelligence and security industry for both private and public sector organizations across the globe, where he served as their lead cyber intelligence and principal Asia-Pacific analyst.