Re-globalization series: Accelerating China's growth through overseas expansion

Chinese companies have the capability and leadership position to expand globally and capture market shares in overseas markets.
This is evident as leaders in various sectors, including consumer, internet, automotive, and battery manufacturers, have successfully ventured abroad while maintaining local presence in China.
The trajectory of global expansion for Chinese companies appears promising, and we anticipate that hundreds of enterprises will follow the footsteps of successful pioneers.
China’s market capitalization is around USD 11,140 billion1 with over 4,200 listed Chinese companies2. We believe the growth potential is substantial, presenting vast opportunities for these companies to establish their presence on the global stage.
Expanding overseas is an additional layer of growth for Chinese companies, fueling their progress and unlocking new opportunities on a global scale.
China‘s outbound direct investment (ODI) increased by 2.2 times from 2010 to 2020, catching up with the size of foreign direct investment (FDI) after 2015.3

Source: CEIC *2023E used 7M23 pro rata.
Auto and battery industry
- The world's leading electric vehicle battery manufacturer in China has expedited its overseas expansion efforts since the supply chain disruption during pandemic. The company holds a substantial >36% of market share in the global EV battery market as of 1H23.4
- The company has a significant rise in its overseas revenue contribution from 4% in 2018 to 23% in 20225 , with higher overseas gross margins due to an improved customer structure and business scale.
- By establishing a closer proximity and notable partnerships with renowned automakers, the company can mitigate logistic costs, enhance operational efficiency and expand global presence.
- Chinese suppliers are expected to sustain their technological and cost advantages over global competitors.

Source: Company report, Bank of America, Sept 2023
Online game sector
- In the online gaming industry, China's in-house game overseas revenue reached a record high of US$16.4 billion in 2021, with 1H23 revenue reaching US$7.5 billion. In fact, China's overseas revenue represents 24% of the total overseas revenue in the gaming industry.6
- Another success story is of one of the largest Chinese online game platforms. The company has invested in more than 60 overseas studios, driving overseas gaming revenue to 25% of its total revenue as of 1H237, showcasing successful overseas expansion efforts.
- The company's efforts have paid off, as they witnessed significant success in the overseas market.

Source: Company report, Bank of America, Sept 2023
Reference:
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1
CEIC, 31 August 2023
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2
Factset, 30 September 2023
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3
CEIC, August 2023 (Market cap of Shanghai and Shenzhen Stock Exchange)
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4
CNEVPOST, August 2023
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5
Bank of America, Sept 2023
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6
Sense Tower, Bank of America, Sept 2023
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7
Technode, May 2023