YICAI | China's Global Business Push Is Stoking Foreign Investors' Interest, UBS Securities Says
(Yicai) Nov. 5 -- As more Chinese companies look to overseas markets for new growth, foreign investors are taking a keen interest in the business opportunities emerging from their global expansion, according to the head of research at UBS Securities.
"We've met with many overseas investors this year who are showing a strong interest in Chinese companies," Xu Bin told Yicai in a recent interview. "Among their key focuses are the overseas investment strategies of listed Chinese firms and their competitive edges in global markets."
In spite of external disruptions, such as US tariff policy, Chinese businesses are steadily growing their overseas revenue share, Xu noted. In the first half of this year, overseas revenue accounted for 13 percent to 14 percent of total sales at listed Chinese companies, up from about 11 percent a year earlier, according to UBS data.
Chinese firms are expanding production capacity abroad to cushion the impact of tariff changes, Xu said, with most of that new capacity concentrated in member countries of the Association of Southeast Asian Nations and Latin America. Fierce competition at home is also prompting many to seek growth opportunities overseas.
"We've noticed that the US is accounting for a smaller share of China's exports, while emerging markets are taking up a larger share," Xu said. "ASEAN, Brazil, and Chile are gradually replacing Mexico as the top destinations for Chinese outbound investment."
Chinese exports were once seen as low-value-added industrial goods supplied to developed markets, Xu said, adding that such as perception is now changing. China's export focus is shifting toward emerging economies and higher-end products such as ships and electric vehicles, he pointed out.
Beyond exports, the overseas activities of Chinese businesses are now covering entire industrial chains, Xu said. Taking Indonesia as an example, he said Chinese firms have made substantial investments in nickel mining and processing there, which has boosted Chinese exports of construction machinery and equipment to the country.
Chinese investments overseas are evolving from basic assembly plants to include upstream segments such as battery and materials manufacturing, Xu noted. Alongside this trend, Chinese brands and cultural products are also expanding abroad, with firms in home appliances, designer toys, and food and beverages stepping up their overseas investment, according to Xu.
In Xu's view, the capital market is playing a key role in helping Chinese companies go global. "For instance, many listed Chinese firms have completed secondary listings in Hong Kong this year, with much of the capital raised used for overseas investments and acquisitions," he said.
To ensure the success of overseas investments, Chinese firms need to actively cooperate with local businesses, Xu suggested. By forming joint ventures and introducing profit-sharing and incentive schemes for local managers, they can achieve genuine mutual benefit and win-win collaboration, he said.