Overview of Chinese Enterprises Expanding into Overseas Markets in 2024: Summary of the European and American Markets

In 2024, driven by factors such as market demand, resource acquisition, brand globalization, and risk diversification, Chinese enterprises continued to seek global expansion. This report summarizes the performance, investment trends, challenges, and policy environment of Chinese enterprises entering the European and American markets in 2024.

Overall Performance of Chinese Enterprises in the European and American Markets

While comprehensive performance data for Chinese enterprises in the European and American markets in 2024 remains limited, some key indicators suggest a mixed situation. The MSCI Emerging Markets Index, which includes Chinese companies, saw a total return of 7.50% in 2024, outperforming the MSCI EAFE Developed Markets Index but significantly lagging behind the U.S. market. Meanwhile, the U.S. benchmark index, the S&P 500, had a total return of 25.02%.

Chinese enterprises in the European market faced challenges. In 2023, the number of Chinese acquisitions in Europe fell to its lowest point in 12 years, with deals dropping from 139 to 119. This decline was attributed to China’s own economic challenges, such as the real estate crisis, which made overseas expansion less likely.

However, some sectors performed well. In 2024, the Shanghai Composite Index rose by 12.67%, and the Hang Seng Index surged by 17.67%. This growth was partly due to the strong performance of industries like electric vehicles (EVs) and renewable energy. In contrast, major European stock indices showed mixed results, with the German DAX index rising by 18.85% and the French CAC 40 index falling by 2.15%.

Investment Trends

Data on the number and amount of investments by Chinese enterprises overseas in 2024 is limited. However, existing information indicates that Chinese enterprises continue to focus on global expansion. Deloitte China assisted over 2,000 Chinese companies in doing business in 96 countries in the fiscal year ending May 31, 2024. Since 2005, China’s overseas investment and construction have totaled over $2.5 trillion.

In Europe, Chinese investment fell to €6.8 billion in 2023, the lowest level in over a decade. This decline was due to China’s economic difficulties, strict capital controls, and increased scrutiny of foreign investments in Europe. However, there was still strong greenfield investment in sectors such as electric vehicles. Notably, although Chinese acquisitions in Europe have decreased, greenfield investments, particularly in the electric vehicle sector, are on the rise. This indicates a shift in investment strategy towards establishing new businesses rather than acquiring existing ones.

In the U.S. market, Chinese investments face resistance due to political tensions and regulatory scrutiny. One venture capital firm predicted that Chinese investments in the U.S. could drop significantly from $28 billion in 2023 to just $10 billion by 2025. Additionally, the financing activities of Chinese companies seeking to list or refinance in the U.S. have slowed considerably.

Key Trends and Challenges

Trends

• Shifting from Market Entry to Global Integration: Chinese enterprises are increasingly focused on integrating into global supply chains and building international brands rather than just entering new markets.
• Focus on High-End Manufacturing: Chinese companies are enhancing their value chains by investing in high-end manufacturing sectors such as electric vehicles, renewable energy, and smart devices.
• Market Diversification: While North America and Europe remain important, Chinese enterprises are increasingly targeting emerging markets in Southeast Asia and the Middle East.
• “Going Global” Strategy: Chinese enterprises are adopting a “going global” strategy, recognizing that global expansion is essential to staying competitive.
• Per Capita GDP Exceeding $10,000: As China’s per capita GDP surpasses $10,000, Chinese enterprises are embarking on a new wave of overseas expansion, similar to the trends seen in the U.S. in the 1970s and Japan in the 1990s.
• Shift from “Bring In” to “Go Out”: China has transitioned from an emphasis on “bringing in” foreign investments to “going out” to secure its own position in global markets, striving to balance both.
• Higher Profit Margins: Chinese EV manufacturers, for example, can achieve profit margins in the Eurozone that are up to 10 times higher than those in China, prompting them to actively expand into Europe.

Challenges

• Instability in International Markets: Geopolitical tensions, economic fluctuations, and growing compliance requirements pose challenges for Chinese companies operating abroad.
• Competition: Chinese enterprises face fierce competition from established firms in the European and American markets.
• Compliance and Regulatory Environment: Adapting to local cultures, navigating different regulatory environments, and ensuring compliance with local standards remain significant obstacles.
• Brand Building: Establishing strong brand recognition and trust in new markets requires significant effort and investment.
• Price Competition: China’s increasing price competitiveness is putting pressure on export companies in the Eurozone.

Policy Environment

In 2024, the policy environment in Europe and the U.S. towards Chinese enterprises expanding overseas is characterized by heightened scrutiny and increased regulatory barriers.

In Europe, the European Union has implemented “de-risking” measures, including stricter investment reviews and regulations on critical raw materials. These measures aim to reduce reliance on China and protect European economic interests. Notably, China has also lifted foreign investment restrictions in manufacturing sectors to attract more foreign investment.

In the U.S., the government continues to tighten its regulatory oversight of Chinese investments, especially in technology and sensitive sectors. The U.S. has also implemented policies aimed at enhancing domestic competitiveness and reducing dependence on Chinese supply chains.

Interestingly, both the EU and the U.S. are pursuing “de-risking” policies, albeit in different ways. This suggests a growing concern in the West about China’s economic and technological rise. The guiding principles for U.S. and European measures towards China are “the three Ds”: De-conflict, Disentangle, and Decline. Additionally, China passed the “Anti-Foreign Sanctions Law” in June 2021, allowing it to seize assets of companies complying with foreign sanctions and take actions against their senior executives.

Case Studies

Success Stories

• Mindray Medical Electronics Co., Ltd.: This medical equipment supplier successfully expanded its global business by serving over 190 countries and regions through 60 subsidiaries worldwide.
• SF Express Co., Ltd.: This logistics service provider focused on expanding its business in Asia, fully leveraging the region’s rapid growth.
• Emerging Chinese Brands: Brands like Envision Energy, Anker Innovations, and Miniso have achieved great success in overseas markets by offering innovative products and adapting to local consumer needs.

Ranking

Failure Cases

• Chinese Companies Listing on European Stock Exchanges: Despite government efforts, the plan to encourage Chinese companies to list on European stock exchanges in London, Zurich, and Frankfurt did not see any new listings in 2024. This is attributed to low liquidity, strict procedures, and geopolitical tensions.

Conclusion

In 2024, the situation for Chinese enterprises expanding overseas is complex and evolving. While some companies have achieved significant success, others face challenges due to economic headwinds, geopolitical tensions, and regulatory barriers.

Key conclusions include:

• Chinese enterprises are increasingly focused on integrating into global supply chains and building international brands.
• Investment in Europe has declined, but greenfield investments in the electric vehicle sector remain strong.
• The policy environment in Europe and the U.S. has become more challenging for Chinese enterprises.
• Success in overseas markets requires adaptability, compliance with local regulations, and a strong emphasis on brand building.

Overall, the trend of Chinese enterprises going global is likely to continue, but companies need to carefully navigate challenges, adapt to the changing global landscape, and ensure sustainable success.

To succeed in the increasingly competitive global market, Chinese enterprises need to develop comprehensive strategies that include the following key aspects:

• Localization: Understanding local market dynamics, consumer preferences, and cultural norms is crucial for tailoring products and services and effectively connecting with local customers.
• Building Trust: Establishing trust with local stakeholders (including governments, businesses, and communities) is essential for long-term success. This can be achieved through transparent communication, ethical business practices, and investments in local communities.
• Responsible Business Practices: Adhering to Environmental, Social, and Governance (ESG) standards is becoming increasingly important for maintaining a strong reputation and ensuring sustainable growth. Chinese companies should incorporate ESG principles into their operations and decision-making.
• Navigating the Policy Environment: Keeping a