Growing emerging markets trade to affect corporates everywhere

Trade between emerging markets is growing rapidly, now accounting for more than half of world trade. The upward trend is likely to continue, affecting how corporates everywhere produce, market and sell their goods.

From just 19 percent in 1990, emerging markets now account for 42 percent of world exports, or 52 percent if you exclude intra-EU trade which is mostly conducted in the euro. During the same period, so-called ‘south-south’ – or trade between emerging markets – has ballooned from 8 to 24 percent of global trade.

The five main drivers of these two related trends look set to continue:

Trade liberalisation is growing Global supply chains are expanding Trade will receive a boost from services The rapid economic growth of emerging markets will help propel trade forward Commodities trade will continue to expand Banks are responding. To capture growing south-south trade flows and better serve their corporate clients, many leading global banks have started to

invest heavily in emerging markets.With new south-south trade corridors becoming increasingly important, and given the strict regulatory environment, it is crucial for corporates to have a strong local banking partner, preferably at both ends of the transaction, to advise and support the trade. That is why we are seeing more emerging market banks, such as Chinese and Indian banks, setting up offshore branches or making acquisitions in major local banks.

Overall, world trade has slowed in recent years, but is likely to pick up with the recovery in Europe and faster growth in the US. Meanwhile, south-south trade will grow with the continuing extension of global supply chains and, increasingly, horizontal trade between countries. Corporates will need to select their banking partners carefully, focusing on banks with deep local knowledge, extended global coverage, and fully-fledged product and solution capabilities.

Article contributed by Standard Chartered Bank .

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