Japan outpaced China in leading global stock growth opportunities.

Chinese companies have significant potential for international expansion, according to HSBC analysts. A study found that only 11.7% of total revenue for mainland China-listed companies came from overseas in 2020. This percentage dropped to 10.3% for the largest companies in the CSI 300 index. In contrast, Japanese companies in the Nikkei 225 derived 35.3% of their revenue from overseas. As Chinese companies face slower growth domestically, they are increasingly looking to expand abroad, with particular interest in industries such as electric cars and consumer products.

One example of a Chinese company with international growth potential is Gongniu, a Shanghai-listed electrical products company. Gongniu has set up subsidiaries in Germany and Indonesia and recruited distributors in the Middle East and South America. While its overseas operating revenue is currently low at less than 2% of its domestic revenue, the company is making efforts to expand globally. HSBC analysts believe that Chinese companies, like BYD and CATL, have the potential to increase their overseas revenue contribution beyond the current 30% level, especially when compared to their Japanese counterparts who derive over 70% of revenue from overseas.

In various industries such as electrical equipment, machinery, and pharmaceuticals, Chinese companies still lag behind their Japanese counterparts in terms of overseas revenue contribution. However, HSBC analysts have identified several Chinese companies with high potential for overseas expansion. Anker, a Shenzhen-listed seller of 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 strong boom lift sales growth in the U.S. market. Snibe, a Shenzhen-listed biomedical engineering company, is projected to achieve a 29% revenue compound annual growth rate in overseas markets.

Despite the potential for overseas expansion, Chinese companies may face challenges from new tariffs imposed by the U.S. and EU. The escalating trade tensions have led to uncertainty for Chinese companies seeking to benefit from international markets. However, David Chao from Invesco notes that trade routes are evolving, with new opportunities emerging between China and regions like the Middle East. The Association of Southeast Asian Nations has become China’s largest trading partner by region, surpassing the European Union in recent years. HSBC analysts also suggest that China has room to increase its overseas direct investment, which can contribute to boosting employment in other countries.

In conclusion, Chinese companies have untapped potential for international expansion, with industries like electric cars and consumer products showing promise for growth abroad. Despite challenges from tariffs and trade tensions, Chinese companies are making efforts to increase their overseas revenue contribution. By investing in local factories and subsidiaries, Chinese companies can not only expand their global footprint but also create employment opportunities in other countries. With strategic planning and market analysis, Chinese companies can carve out a stronger presence in the global market and capitalize on the growing demand for their products and services.