A new generation of Chinese companies is expanding around the world

Yet the expansion abroad also reflects a tantalising opportunity. Having closely watched foreign multinationals operating on their home turf, Chinese firms have learnt to make all sorts of advanced products, from industrial robots to medical equipment. Some even say they have mastered making milky coffees (your correspondent begs to differ). Moreover, pioneers such as ByteDance and Shein, a purveyor of ultra-fast fashion, have shown that China can innovate, not just imitate. Western carmakers such as Volkswagen now want to learn from the country’s ascendant EV firms.

To thrive abroad, Chinese companies are discovering that they must rethink how they do business. Most used to keep as much of their operations as possible in China. That helps explain why the country’s stock of outbound foreign direct investment (FDI) stood at just 17 per cent of its GDP in 2024, much of it in infrastructure and resources projects in developing countries, compared with 38 per cent for America and 57 per cent for Japan, according to the Institute of International Finance, a think tank based in Washington. China’s stock of overseas FDI accounts for just 4 per cent of the global total, about half that of the Netherlands.

That is changing. Spurred on by rising labour costs and Western tariffs, Chinese companies have been busily building overseas factories, many of them in the global south. Cloud providers such as Alibaba, which are serving a growing roster of overseas clients, including the foreign arms of fellow Chinese businesses, are building more data centres abroad.

To build awareness of their brands, Chinese companies are also increasingly setting up foreign stores. Miniso, a retailer from Guangzhou that sells stationery and trinkets, now has more than 3300 outlets overseas, from Texas to Thailand. Xiaomi, which makes everything from smartphones to scooters, plans to have 10,000 overseas shops in the next half-decade or so.

They are mastering local distribution and supply chains too. Shoppers at Ulta Beauty, an American cosmetics retailer, can buy lipstick from Florasis, a beauty brand from Hangzhou. Mengniu, a Chinese dairy company, launched a factory in Indonesia in 2018 and has since become the most popular ice-cream brand in the country.

All this has required a new approach to hiring. Chinese companies with overseas operations have previously tended to move staff abroad rather than recruit locally. That sometimes caused grumbling in host countries, as it meant creating fewer local jobs. Chinese nationals were often also inclined to rely more heavily on suppliers back home.

Now, however, the companies are hiring more locals into roles such as sales, customer service, public relations and even management, notes a partner at a global advisory firm (though he adds that senior finance roles are often still deemed too sensitive to entrust to foreigners). This greater openness often reflects the fact that human resources staff have become more confident in managing foreigners as they themselves have spent more time abroad.

An ecosystem of advisers is also emerging to help Chinese companies expand overseas. Many of the world’s big professional-services firms hail from the West, and have tended to focus more on helping companies from America, Europe and Japan enter China, rather than the other way around. But law firms, accountancies and other advisory businesses, some of them home-grown, are now supporting Chinese firms as they globalise.

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Splitting headaches

They need plenty of help. Chinese companies, particularly those operating in sensitive industries in the West, are acutely aware of the risks presented by regulatory clashes, such as the one that led to the forced sale of TikTok’s business in America, due to be completed this month. Some have structured their businesses to avoid similar problems. Squirrel AI, a Chinese tutoring company, plans to launch in America later this year. It has already established an independent technology platform in the country that is separate from its Chinese operations, says Joleen Liang, a co-founder.

Such arrangements add cost and complexity. Whether they will be enough to appease America’s government is also not clear. This month the Trump administration ordered a reversal of the acquisition of some of the assets of Emcore, an American semiconductor company, by HieFo, a business registered in Delaware but controlled by a Chinese citizen.

Chinese multinationals must also navigate their own government’s wariness. Chinese officials gripe about complex cross-border structures in which only parts of a business fall under their purview. Local taxmen have caught on to the fact that many companies which appear to be struggling in China and paying little tax are thriving abroad and keeping their foreign profits offshore. In some cases, they are requesting more taxable remittances.

China’s government is particularly leery of companies that suddenly uproot their staff and set up headquarters in places such as Singapore. Manus, a popular AI company that moved to the city-state last year, is one such example. Regulators in Beijing are investigating its proposed acquisition by Meta, an American social-media colossus, and may block the deal.

Nonetheless, many Chinese companies looking to go abroad will find their government to be supportive, particularly those whose businesses are not deemed sensitive. Officials appear to have woken up to the power of global brands. State media now celebrate Labubus – cuddly toys created by PopMart, a Chinese firm, that have swept the world – as a sign of growing cultural strength. The central government may begin to relax approvals for overseas investments, which are currently very tight, says Denis Depoux of Roland Berger, a consultancy. Shoppers around the world can count on stumbling across more buzzy Chinese brands in the year ahead.

The Economist

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