(Yicai) Jan. 15 -- Chinese mainland-listed companies will further grow their overseas income as a share of revenue over the next five to 10 years after quadrupling it over the past two decades, according to the head of China research at UBS Securities.

Income from overseas markets accounted for only 3 percent to 4 percent of total revenue 20 years ago, but had climbed to 15 percent by 2024 and rose further in the first half of last year, Robin Xu said at UBS' 26th China Conference held in Shanghai yesterday.

Chinese companies are investing heavily in foreign markets in a long-running “go global” push. With firms setting up operations abroad under the “China Plus One” strategy, this is an expansion that is no longer driven solely by exports to developed markets, making overseas business an increasingly important part of Chinese corporate earnings growth.

Looking at exports, Xu pointed out that Chinese shipments to the United States and countries in the Association of Southeast Asian Nations show a clear inverse relationship. When exports to the US decline, those to the ASEAN tend to grow, he said.

China's exports grew 6.1 percent to CNY26.99 trillion (USD3.87 trillion) last year, with those to the US plunging nearly 20 percent, and those to ASEAN and Africa surging 13 percent and 26 percent, respectively, according to trade figures released yesterday.

Africa was among the fastest-growing export markets, mainly because of active trade in small commodities, infrastructure projects that generate equipment exports, and rerouted maritime traffic around the continent due to Red Sea shipping disruptions, Xu noted. “As there is real demand behind Africa, we believe that it will perform very well also this year,” he said.

Export diversification is evident not only in destination markets but also in product categories. From small commodities to high-end manufacturing and cutting-edge semiconductor equipment, China exports a wide variety of products. The export activity centered on Yiwu, a city in Zhejiang province famous for having the world's largest wholesale market for small commodities, is particularly striking.

China's exports will likely grow 2.5 percent this year and 5.5 percent next year, UBS forecasts. This year’s slower growth is due mainly to 2025’s high base of comparison, but the long-term trend of export diversification will not change, Xu pointed out.

On overseas capacity and the “China Plus One” strategy, by which Chinese firms diversify manufacturing beyond the home market to at least one other country, Xu said that last year the number of investment projects Chinese firms planned in Southeast Asia rose 17 percent year on year, while the total planned investment value increased by 7 percent.

ASEAN is an attractive location for Chinese companies to invest in to avoid US import tariffs and access the region's 600 million population, Xu said, adding that their competitors are international brands, so there are lower risks of protectionism.

The attractiveness of Latin American countries was patchy last year, with the total number of Chinese investment deals in the region halving to 15, mainly because of a sharp decline in investments in Mexico, which was also targeted by US tariffs. 

"Two years ago, companies wanted to increase capacity through Mexico, utilizing the US-Mexico-Canada Agreement to export to the US at zero tariffs," Xu noted. “But later they discovered that this path doesn't really work.”

Brazil has replaced Mexico as the primary investment destination in Latin America, being the region’s largest economy and having strong domestic demand. China-Brazil cooperation in resources and the grain sector has also driven more companies to establish a presence there, according to Xu.

In terms of industries, China’s automotive sector is the most closely watched example of overseas expansion. Passenger car exports surged to about six million last year from one million five years ago, with the average unit price surging to CNY300,000 (USD43,040) from CNY100,000.

By 2030, Chinese automakers' share of their home market will likely rise to 85 percent from 70 percent, with it rising to 15 percent from 5 percent in Western European, while that of the US market will remain at zero, UBS predicted. Their share of other global markets will rise to 25 percent from 20 percent.

Chinese motorcycles will take up to 40 percent of the European market by 2030, with electric heavy-duty trucks and buses also showing considerable upside, UBS forecasts. "China's cost-performance ratio is very high, given its advantages in electrification, autonomous driving, and assisted driving functions," Xu said.

Editor: Futura Costaglione