The Strategic Rise of the Shanghai Cooperation Organisation (SCO) and Its Implications for Global South Equity Markets

The Shanghai Cooperation Organisation (SCO), now comprising 10 members, has emerged as a pivotal force in reshaping global economic dynamics. By prioritizing trade facilitation, infrastructure connectivity, and sustainable development, the SCO is creating a new axis of investment opportunities in the Global South. China, as the dominant economic power within the group, has leveraged its Belt and Road Initiative (BRI) and Digital Silk Road to deepen integration with partner states, generating $890 billion in trade with SCO members in 2024 alone [1]. This surge in economic activity is not merely a reflection of bilateral cooperation but a strategic recalibration of global supply chains, driven by China’s growing geopolitical influence and the SCO’s institutionalization of multilateralism.

Infrastructure and Renewable Energy: The New Pillars of Growth

The SCO’s focus on infrastructure has unlocked transformative potential for equity markets in emerging economies. Flagship projects like the China-Central Asia-West Asia Economic Corridor and the China-Kyrgyzstan-Uzbekistan Railway have reduced trade barriers and enhanced regional connectivity, directly boosting sectors such as logistics, construction, and energy [1]. In Pakistan, the Karot Hydropower Station—a flagship China-Pakistan Economic Corridor (CPEC) project—has not only increased clean energy production but also created local employment and skill development opportunities [4]. Similarly, Kazakhstan’s Akmola wind power cluster and Uzbekistan’s Zarafshan wind project are redefining energy access in these countries, with renewable energy capacity in the region reaching 2.31 billion kW by 2024 [1].

Renewable energy, in particular, has become a cornerstone of the SCO’s economic strategy. China’s investments in solar and wind projects across Central Asia and South Asia are accelerating decarbonization while attracting private capital. For instance, Uzbekistan aims to generate 25-30% of its electricity from renewables by 2030, supported by Chinese and European partnerships [5]. These projects are not only reducing reliance on fossil fuels but also creating long-term value for equity markets, as renewable energy firms and infrastructure developers gain traction.

Digital Infrastructure and the Rise of the Digital Silk Road

The SCO’s digital transformation is equally transformative. The Digital Silk Road, a subset of the BRI, has expanded cross-border e-commerce and digital infrastructure, with Chinese platforms like Alibaba and JD.com expanding into Central Asia. In 2024, cross-border e-commerce between China and other SCO countries grew by 34%, driven by digital customs systems and local-currency settlements [1]. Pakistan’s Digital Public Infrastructure (DPI) initiatives, including mobile cash transfer programs and branchless banking, have already increased financial inclusion, with 114 million digital accounts as of 2023 [6]. Such developments are attracting investors to fintech and digital infrastructure stocks, which are poised to benefit from regulatory reforms and youth-driven demand.

However, the digital boom is not without risks. Geopolitical tensions, such as India’s cautious stance on SCO initiatives and U.S. trade policies, could disrupt cross-border data flows and investor confidence [2]. Additionally, regulatory gaps in countries like Uzbekistan—where long-awaited capital market legislation remains pending—pose barriers to portfolio investment [5].

Equity Market Dynamics and Geopolitical Realities

The equity markets of SCO member states have shown resilience amid global uncertainties. China’s benchmark indices, including the Shanghai Composite and Shenzhen Component, surged by 7.6% and 10%, respectively, in August 2025, driven by high-tech sectors like chip design [1]. India’s reengagement with the SCO has also bolstered its equity markets, particularly in manufacturing and fintech, though unresolved border tensions with China remain a wildcard [2].

For investors, the SCO’s economic integration offers a dual advantage: access to high-growth sectors and diversification away from Western-dominated markets. However, the region’s geopolitical complexities—such as Russia’s alignment with China and India’s balancing act between the U.S. and the SCO—require careful risk assessment. The 2025 Tianjin summit, which emphasized “partnership over rivalry,” signals a commitment to stability, but external shocks like U.S. tariffs or regional conflicts could still disrupt momentum [3].

Conclusion: A Multipolar Future for Global South Equity Markets

The SCO’s strategic rise is redefining the investment landscape in the Global South. By prioritizing infrastructure, renewable energy, and digital transformation, the organization is creating a parallel system of economic integration that challenges traditional Western-led models. For investors, this presents opportunities in sectors aligned with China’s geopolitical and economic priorities, while also necessitating vigilance against geopolitical risks. As the SCO continues to institutionalize its economic agenda, its member states are likely to see sustained equity market growth, driven by a blend of state-led initiatives and private-sector innovation.

Source:
[1] How the SCO is shaping a new economic landscape [http://en.chinadiplomacy.org.cn/2025-08/27/content_118045597.shtml]
[2] The Rise of the Beijing-Russia Axis: Strategic Implications [https://www.ainvest.com/news/rise-beijing-russia-axis-strategic-implications-emerging-market-equities-2508/]
[3] 'Shanghai Spirit' key to addressing global challenges [https://en.people.cn/n3/2025/0831/c90000-20359677.html]
[4] Global Times: China and SCO partners drive green transition [https://www.globenewswire.com/news-release/2025/08/31/3141942/0/en/Global-Times-China-and-SCO-partners-drive-green-transition-through-clean-energy-projects-sustainable-development-cooperation.html]
[5] Uzbekistan Renewable Energy - Market Share Analysis [https://www.researchandmarkets.com/reports/5025218/uzbekistan-renewable-energy-market-share?srsltid=AfmBOoqCD8sTIzXOU-w-8YMcU9-dJocjEtziAOPZS1pPnWx6QvD4n1ic]
[6] Pakistan's Digital Public Infrastructure (DPI) Initiative [http://www.riazhaq.com/2024/07/pakistans-digital-public-infrastructure.html]