Edmund Li Sheng, Distinguished Professor at Shandong University and Executive Director of its Shanghai Cooperation Organization Studies Institute, holds an honorary professorship at the China-SCO Institute of Economy and Trade.
The 2025 SCO Summit, held in Tianjin from August 31 to September 1, marked China’s fifth hosting of the event and the largest in SCO history. President Xi Jinping chaired both the Council of Heads of State meeting and the "SCO+" conference, delivering keynote speeches that outlined China’s vision for upholding the "Shanghai Spirit" to address global challenges. He announced concrete measures to advance high-quality SCO development and all-round cooperation, proposing innovative approaches to safeguard the post-WWII international order and enhance global governance.
The global economy now faces a vicious cycle of "high inflation-high debt-low growth" driven by unilateral tariffs and U.S. debt risks. As multilateral trade rules fragment into tariff walls and U.S. Treasury yields become a crisis-transfer tool, regional cooperation emerges as a shield against dollar volatility and a catalyst for reshaping globalization. The Tianjin Summit’s outcomes—including the "Tianjin Declaration" and the "SCO Development Strategy for 2026-2035"—signal transformative global impacts. How can these regional solutions scale into universal public goods? Sheng Li, in this "Theoretical Research" exclusive, argues that regional cooperation is the century’s key to breaking deadlocks, bridging global governance gaps, and transitioning from fragmentation to inclusivity.
Consensus Within the SCO Family
Financial Times Reporter: With the WTO multilateral mechanism at risk of dysfunction, why has the SCO become a critical platform for countering unilateralism in geoeconomic rivalry?
Sheng Li: Two contextual factors explain the SCO’s role as a multilateral hedging platform against tariff and debt shocks. First, the U.S. has weaponized tariffs and Treasury debt: the 2025 "Strengthened Trade Enforcement Act" authorizes 500% tariffs on "non-market economies" and allows freezing dollar clearing for nations holding over $200 billion in U.S. debt, exposing developing nations to dual risks of export tariffs and reserve freezes. Second, the WTO Appellate Body has been defunct for five years, eroding dispute resolution, while RCEP and CPTPP—despite tariff reductions—remain dollar-dependent, failing to address systemic "dollar-Treasury" risks. Meanwhile, the SCO’s "three-pronged strategy"—membership expansion, rule innovation, and project implementation—positions it as a unilateralism hedge. The Tianjin Summit reaffirmed support for the WTO-centered system and called for eliminating unilateral WTO-violating practices, championing fairness over hegemony.
The SCO introduces three distinct logics for non-dollar resilient supply chains:
Political consensus precedes market access: Core principles like consensus and non-interference enable pre-sanction market openness and infrastructure sharing. The 2024 Investment Promotion Working Group enshrined "opposition to unilateral economic coercion" in a joint statement; the 2025 Foreign Ministers’ Council elevated digital sovereignty to territorial sovereignty’s level. The "SCO Development Strategy for 2026-2035" sets a decade-long roadmap grounded in the Shanghai Spirit, ensuring supply chain stability amid external shocks.
Real economy anchors drive growth: Unlike dollar-dependent globalization, the SCO uses energy, mining, manufacturing, and digital networks as collateral. Sino-Russian crude trade, with 80% local currency settlements ($68 billion in 2024), demonstrates how de-dollarization nullifies U.S. tariff threats. The SCO’s 27 members—representing half the global population, 40% of GDP (PPP), and a third of strategic resources—form a resilient resource pool impervious to long-arm jurisdiction.
Infrastructure connectivity replaces offshore finance: Hard connectivity reduces dollar reliance. By August 2025, the SCO had built 14,000 km of highways, 110,000 China-Europe freight trains, and flagship projects like the China-Kyrgyzstan-Uzbekistan Railway (reducing China-Europe freight to 7 days from 27 days) and the Central Line Gas Pipeline D-line (30 billion m³/year capacity, meeting 40% of Central Asia’s gas exports by 2026). These projects enable regional "internal circulation" and a 2030 unified market.
President Xi announced three China-SCO platforms (energy, green industry, digital economy) and three centers (technology innovation, higher education, vocational education) to share China’s development dividends. The summit also endorsed the SCO Development Bank, a decade-long Chinese initiative now materializing to boost Eurasian infrastructure and socioeconomic growth.
SCO’s Systemic Solutions
Financial Times Reporter: How does the SCO integrate digital empowerment, energy autonomy, and rule-making into systematic solutions? What breakthroughs emerged in Tianjin?
Sheng Li: Breaking the "tariff-sanctions" lock requires a synergy of digital tools, energy transactions, and rules. The SCO modularized this synergy into institutional frameworks at Tianjin. The summit’s "one declaration + 24 documents" consolidated tech, energy, and financial modules into replicable regional public goods, forming a "technology-energy-rule"闭环. Foreign Minister Wang Yi highlighted this as outcomes 4-7:
Digital transformation: The 2025 "SCO Digital Transformation Action Plan" advances 5G smart cities, e-government interoperability, and cross-border e-commerce. The "Declaration on Strengthening Digital Economy Development" mandates digital infrastructure upgrades, sectoral digitization, and talent development.
Energy autonomy: The "Declaration on Sustainable Energy Development" promotes joint energy projects (e.g., new/upgraded infrastructure) and investment based on priority sectors, fostering a fair global energy model.
Tariff dismantling: Blockchain-based systems like Qingdao’s "single declaration, dual customs certification" cut clearance times and costs for Iran saffron and Kazakh wheat. Digital platforms enable dollar-free transactions (e.g., Iranian artisans buying Yiwu goods via SCO e-commerce, bypassing customs and dollar clearing).
New Platforms for International Cooperation
Financial Times Reporter: How does the SCO Demonstration Zone foster cooperation? How do Tianjin outcomes scale globally?
Sheng Li: Established in Qingdao in 2019, the SCO Demonstration Zone pioneers Belt and Road cooperation in logistics, trade, investment, and cultural exchanges. Its institutional innovations include:
Comprehensive service platform: A one-stop hub for trade, customs, logistics, and finance, attracting thousands of SCO enterprises.
Silk Road E-commerce Base: A cross-border e-commerce system addressing settlement and clearance pain points.
Industrial Park Alliance: Integrating Chinese and member-state parks to drive industrial synergy and transnational cooperation.
This model bridges major-power strategies and regional needs, enabling deep project and industrial alignment. It boosts SCO trade, investment, and supply chain integration while providing replicable governance templates. With global shifts toward green development, digital economy, and industrial upgrading, local cooperation will play an even greater strategic role.
