Chinese companies have historically focused on their domestic market, with a relatively low percentage of revenue coming from overseas. According to HSBC analysts, only 11.7% of total revenue for mainland China-listed companies came from outside the country last year. This number dropped even further to 10.3% when looking specifically at the largest companies listed in the CSI 300 index. In comparison, Japanese companies in the Nikkei 225 saw 35.3% of their revenue coming from overseas in the same period.
Amidst slowing growth in the domestic market, Chinese companies have begun to look towards global expansion as a way to fuel their growth. Sectors such as electric cars and consumer products have been highlighted by investment analysts for their potential in the international market. UBS Asia Pacific equity analyst Christine Peng emphasized the untapped opportunities for Chinese consumer companies to expand globally, especially in emerging markets where growth potential is significant.
One notable example is Gongniu, a Shanghai-listed company specializing in electrical products. While the company has started to expand overseas by setting up subsidiaries in Germany and Indonesia, its international revenue still only accounts for a small percentage of its total revenue. This is a trend seen across various industries in China, where the contribution of overseas revenue remains low compared to other global players.
Despite the challenges, there are promising signs of growth for Chinese companies looking to expand globally. Companies like BYD and CATL have made significant strides in gaining global market share, with their overseas revenue contribution reaching around 30%. However, there is still a long way to go compared to Japanese companies, where overseas revenue can make up more than 70% of their business in certain sectors.
HSBC analysts have identified several Chinese companies with strong potential for global expansion. Anker, a Shenzhen-listed seller of power banks and chargers, has seen a surge in U.S. sales on Amazon. Zhejiang Dingli, a manufacturer of cherry pickers and lifts, is expected to benefit from strong sales growth in the U.S. market. Snibe, a biomedical engineering company, is forecasted to experience significant revenue growth in overseas markets, particularly in clinical laboratory instruments.
While the potential for Chinese companies to expand internationally is promising, there are also challenges on the horizon. New tariffs imposed by the U.S. and EU add uncertainty to the equation, making it difficult to predict how Chinese companies will fare in overseas markets. The shifting landscape of global trade relations further complicates the picture, requiring Chinese companies to navigate complex geopolitical dynamics.
Despite these challenges, Chinese companies have ample room for growth in the global market. The current level of overseas direct investment relative to GDP is still relatively low compared to other countries, indicating untapped potential for expansion. By investing in local factories and subsidiaries in foreign markets, Chinese companies can not only increase their global presence but also contribute to employment growth in other countries.
Chinese companies have a significant opportunity to expand their presence in the global market. By leveraging their strengths in key sectors and addressing the challenges of international expansion, Chinese companies can position themselves for sustainable growth on the global stage.