Based on data for the first five months of this year, ASEAN (ten Southeast Asian countries), Japan and South Korea accounted for nearly one-third of China’s foreign trade.

Adding to that the remaining nine BRICS members, ten partner countries, and steady trade relations in Central Asia, Africa and Latin America, Beijing’s business with friends and allies makes up about 75% of its total foreign trade transactions in goods and services.

That virtually captive market is of enormous importance for China’s economy at a time of radical changes in the international system of trade and finance.

People who think that China’s contested territorial claims in the South China Sea present serious political and economic problems with its Asian neighbors should think again.

Japan is China’s only major Asian trade partner with sovereignty issues of Senkaku/Diaoyu islands in the South China Sea. In spite of that, Japan maintains a growing trade with China; its purchases of Chinese goods during the January-May interval of this year increased 4.4% from the same period of 2024.

And to make sure that Japan’s western political and military alliances won’t stand in the way of flourishing business deals with Beijing, Tokyo has a constant flow of parliamentary, business and civic delegations to China.

Beijing’s growing Asian trades

More generally, China and the ASEAN countries are nearing a conclusion of the Code of Conduct in the South China Sea that would reaffirm agreements for bilateral consultations and a peaceful resolution of problems arising from overlapping territorial claims.

China’s trade with BRICS members and partners -- and the rest of the Global South – is free of political and major competitive frictions. That large segment of world markets is expected to provide significant growth opportunities for China’s trade and investments.

Africa and Latin America are China’s strong trade markets. In the first five months of this year, China’s trade with those two continents came in at $347 billion. That was double China’s trade with U.S. and 60% more than Beijing’s trade transactions with the E.U.

Brazil and the Republic of South Africa (RSA) represent only 32% and 15%, respectively, of China’s total trade business in Latin America and Africa.

As an informal leader of Global South, China will continue to expand its economic, political and cultural presence in Africa and Latin America to offset declining trade and growing political and security tensions with the U.S. and the E.U.

U.S.-China problems appear intractable even though high-level contacts are going on all the time. The last such contact was the foreign ministers’ consultations on the sidelines of an ASEAN Plus meeting in Kuala Lumpur, Malaysia, July 11, 2025.

Developing Global South markets

The result of that dialogue was summarized by the Chinese side as “strengthening contact, preventing misjudgment, managing differences, and expanding cooperation.”

In fact, what is going on is a permanent crisis management. The key flashpoints are the status of Taiwan, China’s contested maritime borders, America’s freedom of navigation and overflight in South China Seas -- which, according to China, violate its sovereignty and territorial integrity -- Washington’s trade policies seen by Beijing as aiming to “suppress” China’s economic development, etc.

The latest blow to U.S.-China relations are media reports that American defense officials are “seeking clarity” from Japan and Australia regarding the role they would play if the U.S.-China war were to break out about the status of Taiwan. For China, Taiwan is one of its provinces, and no foreign interference is allowed.

Under these circumstances, normal trade relations are quite difficult. It, therefore, should not come as a surprise that the U.S.-China trade declined 9 percent in the first five months of this year, with China’s exports to U.S. falling 10% and Chinese purchases of American goods dropping 7.4%.

A similar situation is unfolding in E.U.-China trade. Transactions were on a sharply declining trend in the first five months of this year. Established supply chains are still supporting Chinese exports to the trading bloc (+6.4%), but China is actively hedging its E.U. imports (-7.3%) in anticipation of major economic and political issues of E.U.’s “de-risking” policies toward Beijing.

The E.U. Commission complains about China’s state-subsidized overproduction to eliminate foreign competitors, E.U. companies’ limited access to Chinese markets, Beijing’s export restrictions, etc. China is also accused by the E.U. of helping Russia to finance its military operations in Ukraine.

Relations apparently have become so strained that some E.U. officials are even questioning the need for a July 24, 2025, E.U.-China summit in Beijing.

The message to China is clear: To stabilize the flows of its foreign trade Beijing will have to develop suitable alternatives to one-fifth of its business transactions that are currently taking place with American and E.U. partners.