The Untapped Global Potential of Chinese Companies

The Untapped Global Potential of Chinese Companies

Chinese companies have been steadily increasing their presence in the global market, but there is still significant untapped according to HSBC analysts. Despite the rapid growth of the Chinese economy, a large portion of for Chinese companies still comes from domestic sources. In contrast, Japanese companies have a much higher percentage of revenue coming from overseas markets, indicating that there is room for Chinese companies to expand internationally.

A study by HSBC found that only 11.7% of total revenue for mainland China-listed companies came from outside the country last year. This percentage drops even lower to 10.3% when looking at the largest companies in the CSI 300 index. In comparison, companies in Japan's Nikkei 225 had 35.3% of their revenue coming from overseas markets. This clearly illustrates the disparity in international expansion between Chinese and Japanese companies.

Since the pandemic, Chinese companies have been looking to expand abroad due to slowing growth in the domestic market. Sectors such as electric cars and consumer products have been highlighted as having significant potential for international expansion. According to UBS Asia Pacific equity analyst Christine Peng, there are structural growth from consumer companies' global expansion that are currently underappreciated by investors, especially in emerging markets.

One company that stands out in terms of international expansion is Gongniu, a Shanghai-listed company that sells electrical products. Gongniu has set up subsidiaries in Germany and Indonesia, indicating a commitment to expanding its global presence. Despite this effort, the company's overseas operating revenue still only accounts for a small percentage of its total revenue.

When comparing the contribution of overseas revenue to total revenue, Chinese companies lag behind Japanese companies across various industries. HSBC analysts noted that leading Chinese companies like BYD and CATL have started to gain global market share, with overseas revenue contributing around 30%. However, Japanese counterparts have grown their overseas revenue to more than 70% of their business, highlighting the gap between the two countries.

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HSBC analysts have identified several Chinese companies with strong potential for international growth. Anker, a Shenzhen-listed seller of power banks and chargers, has seen a surge in U.S. Amazon . Zhejiang Dingli, a Shanghai-listed manufacturer of cherry pickers, is expected to benefit from strong boom lift sales growth in the U.S. market. Snibe, a Shenzhen-listed biomedical engineering company, is projected to experience significant revenue growth in overseas markets.

While Chinese companies have great potential for international expansion, new U.S. and EU tariffs pose a challenge. The current global trade environment has become increasingly uncertain, which may impact how Chinese companies navigate overseas markets. Despite this, there are new opportunities emerging, such as trade routes between China and the Middle East, indicating that there is still room for growth in international trade.

Chinese companies have significant untapped potential in the global market. While they have made strides in expanding internationally, there is still room for growth, especially in sectors like consumer products and electric cars. By in overseas markets and leveraging their strengths, Chinese companies can continue to increase their presence on the global stage.

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