According to HSBC analysts, Chinese companies still have a long way to go when it comes to expanding internationally. Their study revealed that only 11.7% of the total revenue for mainland China-listed companies came from outside the country. The number dropped even lower to 10.3% when focusing on the largest companies in the CSI 300 index. This stands in stark contrast to Japanese companies where 35.3% of revenue in the Nikkei 225 index came from overseas.
The ongoing pandemic has led Chinese companies to look beyond their borders for growth opportunities due to the sluggish growth in the domestic market. Sectors like electric cars and consumer products have been identified as having significant international potential. Investment analysts believe that consumer companies’ global expansion opportunities are being undervalued by investors, especially in emerging markets like China.
One highlighted company is Gongniu, based in Shanghai, which specializes in electrical products such as wall sockets, switches, and lighting. Although it only generates a small percentage of its revenue from overseas operations currently, its recent expansions in Germany, Indonesia, and other regions show promise for future growth. Gongniu’s revenue has seen a 14% increase from the previous year, reaching 3.8 billion yuan.
Chinese companies lag significantly behind Japanese companies in terms of overseas revenue contribution across various industries. While leading Chinese companies like BYD and CATL have made efforts to gain global market share, their overseas revenue contribution is still around 30%, far below Japanese counterparts who have exceeded 70% of their business from international markets. The gap is evident in sectors like electrical equipment, machinery, and pharmaceuticals, where Chinese companies have a long way to go.
HSBC analysts have identified promising Chinese companies for global expansion across different sectors. Anker, a Shenzhen-based brand specializing in power banks and chargers, has seen a surge in U.S. Amazon sales. Zhejiang Dingli, a Shanghai-listed manufacturer of lifts, is expected to benefit from growth in the U.S. market. Snibe, a Shenzhen-listed biomedical engineering company, has shown strong sales momentum in overseas markets, especially in reagent sales and instrument installations.
Despite the potential for international expansion, Chinese companies face uncertainties due to new U.S. and EU tariffs. The evolving trade landscape has shifted towards tougher global trade policies, impacting China’s exporting capabilities. However, new trade routes between China and regions like the Middle East are emerging, highlighting the adaptability of Chinese companies. The Association of Southeast Asian Nations has become China’s largest trading partner, signaling a shift in global trade dynamics.
HSBC analysts emphasize that China still has significant room to increase its overseas direct investment. The current level relative to GDP is comparable to Japan in 2012 and Germany in 1992, indicating untapped potential for Chinese companies to expand globally. Investing in local factories and subsidiaries can not only drive growth but also boost employment in other countries, creating a win-win situation for both China and its international partners.