(Yicai) Nov. 5 -- International investors are paying close attention to the opportunities brought about by Chinese companies exploring foreign markets and engaging in overseas investment, according to the head of research at UBS Securities.

"We have welcomed many overseas investors who were highly interested in Chinese enterprises this year," Xu Bin told Yicai in a recent interview. “Among their key focuses, there were the overseas investment plans of listed Chinese companies and their competitive edges in global markets.”

Despite external disruptions, such as the US tariffs, overseas revenue is contributing more and more to Chinese firms' earnings, Xu noted. In the first half of the year, the average share of listed companies' overseas revenue to the total rose to about 13 percent to 14 percent from about 11 percent a year earlier, according to UBS data.

Chinese enterprises are responding to changes in tariff policies by enhancing their overseas production capacities, mainly in the Association of Southeast Asian Nations and Latin America. The fact that domestic market competition is intensifying is another significant factor prompting Chinese firms to seek greater growth opportunities abroad.

"We have observed that the proportion of Chinese product exports to the United States is declining, while that to emerging markets is rising," Xu pointed out. “ASEAN, Brazil, and Chile are gradually replacing Mexico as the main destinations for Chinese companies' overseas investments.”

Chinese exports were previously perceived as low-value-added industrial goods to developed markets. But now, the situation has changed. China is increasingly focusing on emerging markets as main export destinations, and the quality of its exports is gradually shifting toward high-end items, such as ships and electric vehicles, Xu explained.

Chinese enterprises are gradually achieving full supply chain coverage overseas in terms of localized investments and exports, Xu said. For example, they have made large-scale investments in nickel mining and processing in Indonesia while also exporting construction machinery and equipment to the Southeast Asian nation.

Chinese companies' overseas investments have gradually evolved from building assembly plants to expanding into the upstream reaches of the supply chain, including batteries and materials, according to Xu. The output of the Chinese brands and culture has also emerged, with consumer goods firms in sectors such as home appliances, trendy toys, and dining accelerating their investments abroad.

In Xu's view, capital markets are providing strong capital and financial support to Chinese enterprises going global. "For example, many listed Chinese companies have completed secondary listings in Hong Kong this year, with the funds raised being largely used for overseas investments and acquisitions." 

To ensure the success of overseas investments, Chinese firms operating abroad should actively collaborate with local partners, Xu suggested. By establishing joint ventures, they can share profits with local partners, and provide incentive mechanisms for local management, truly achieving a win-win collaboration. 

Editors: Tang Shihua, Futura Costaglione