HSBC-China Equity Strategy-How to ride the going global wave-108578620

Disclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it.Play video with Steven SunBy: Steven Sun (S1700517110003), Jeffrey Xie (S1700523100002)China Equity StrategyHow to ride the going global waveAs China’s companies increasingly go overseas for their next leg of growth, we provide a roadmap and detail the challenges involvedIn 2023, overseas revenue constituted, in aggregate, only 10.3% for companies in China’s CSI 300, which is low and leaves room for growthWe also take China’s industry leaders and compare them to global titans, and highlight related sectors and stockswww.research.hsbc.comEquity Research ReportChina StrategyJune 2024S P O T L I G H Twww.research.hsbc.comMonth YearAutomationEquity Research ReportSectorThematic researchDemographicsEquity Research ReportSectorThematic researchwww.research.hsbc.comMonth YearDigital FinanceEquity Research Reportwww.research.hsbc.comMonth YearSectorThematic researchDisruptive TechnologyEquity Research Reportwww.research.hsbc.comMonth YearSectorThematic researchEnergy TransitionEquity Research Reportwww.research.hsbc.comMonth YearSectorThematic researchFuture CitiesEquity Research Reportwww.research.hsbc.comMonth YearSectorThematic researchFuture ConsumerEquity Research Reportwww.research.hsbc.comMonth YearSectorThematic researchFuture TransportEquity Research Reportwww.research.hsbc.comMonth YearSectorThematic researchTrade FlowsEquity Research Reportwww.research.hsbc.comMonth YearSectorThematic researchwww.research.hsbc.comMonth YearNine ThemesEquity Research ReportSectorThematic research 1 Equity Strategy ● China June 2024 Why are Chinese companies going global? This is one of the most widely discussed topics among investors this year given China’s growing global competitiveness and lacklustre demand at home. But it’s more than just low-cost exports – it also includes direct investing and setting up subsidiaries in either a target country or a nearby country. We believe the strategy can have benefits for both sides. For China, it helps companies find another growth engine, enables sectors to deal with overcapacity, and can help Beijing improve its competitiveness by moving towards high-end and high-tech fields. For overseas markets, China’s going global strategy can help keep prices low and create local employment. Still, it can also be a tug of war as this strategy can intensify local competition and face various barriers like tariffs and anti-dumping investigations amid growing protectionism. Where are we in this journey? Our analysis shows overseas revenue constituted, in aggregate, only 10.3% for companies in China’s CSI 300 index and 11.7% for all A-shares, as of 2023. We believe there is more room to grow. For comparison, these numbers are far lower than China’s share of exports in overall GDP (18.9% in 2023), Japan’s Nikkei 225 (35.3% in 2023), and the FTSE Germany inde