Investing in the next phase of China’s global expansion
Key takeaways
A new generation of Chinese companies is shifting from exporting products to building overseas factories, local capabilities, and global brands.
- This expansion takes two forms: horizontal outbound investment, building factories and service networks near the end market, and vertical outbound investment, where higher-value activities stay onshore while labor-intensive assembly moves to other emerging markets, particularly Southeast Asia.
- Tariffs, trade barriers, and intense domestic competition are both pushing companies to expand abroad, since exporting can bring higher margins than competing in China's crowded home market.
- China's expanding technological leadership, from electric vehicles and clean energy to AI and advanced manufacturing, is bringing a new wave of Chinese companies and products to global markets, extending beyond industrial goods to cultural exports.
China has long been the world’s leading manufacturer and exporter. A new generation of Chinese companies is now building overseas operations, local capabilities, and global brands, creating a range of new investment opportunities.
For decades, ‘going global’ meant exporting for Chinese companies. Today it increasingly means building truly global businesses, with factories, logistics networks, research centers, and localized customer support around the world.
“It’s not just the finished product going global - it’s the capability going global,” said Brian Zheng, CFA, Fund Manager at Tangfeng Investment and Founding Partner at Lion’s Academy.
Several forces are converging to drive this shift. The most visible is geopolitical: tariffs, trade barriers, and local content requirements in the US, Europe, and across emerging markets have made local manufacturing increasingly necessary for companies in sectors from consumer electronics to heavy equipment.
But Eri Xia, CFA, Investment Director at Trio Metal (GZ) - which supplies titanium and aluminum frames for iPhones and is in the process of acquiring a parts supplier for BMW in Europe - said that trade barriers are only part of the story.
“The competition in China is so fierce that prices are very low compared to the rest of the world,” he said. “When companies export overseas, the margin is much higher, so they are, in many cases, effectively forced to expand.”
Increasingly, however, companies are moving overseas not because of tariffs but because they genuinely want to operate like local companies - understanding customers on their own terms and building durable market positions from nearby.
Xueshi Bai, CFA, Deputy Director of Beijing International Wealth Management Institute, said the structural shift takes two distinct forms.
The first is horizontal outbound direct investment (ODI): building factories, sales networks, and service operations close to the final market.
The second - and in Bai’s view the more strategically significant - is vertical ODI, where China retains high-value activities such as core components, engineering software and capital equipment, while more labor-intensive assembly moves to other emerging markets – particularly in neighboring Southeast Asia.
“This is not necessarily a loss of industrial power,” he said. “If China supplies machinery, batteries, and industrial technologies to factories in Asia, it may capture more value than exporting a final, low-margin good.”
China’s expanding technological leadership - in areas from electric vehicles (EVs) and clean energy to AI and advanced manufacturing - is bringing a new wave of Chinese companies and products to global markets.
How are Chinese companies building overseas capabilities?
Zheng framed China’s global expansion as a series of challenges of escalating complexity, illustrated by three case studies from his investment research.
The first is Fuyao Group, the world’s largest auto glass manufacturer, which set up production in Ohio, in the US, after acquiring a local plant. Auto glass must be co-developed, certified, and delivered just in time - the challenge is primarily one of execution. It took Fuyao’s Ohio facility approximately a decade to catch up to the group’s operating margin, an indication of the patience required by investors to see genuine global expansion through.
“In the long term, the crucial part is how much local capability you can build,” said Zheng. “Can you really service the customer there long-term and create large, stable cash flows?”
The second is Sany Heavy Industry, a major producer of construction, earthmoving, and mining equipment, which acquired German manufacturer Putzmeister in 2012 - initially to absorb European manufacturing know-how. Today, Sany is expanding rapidly in the fast-growing construction markets of Asia, Latin America and Africa, where it competes with established global manufacturers such as Caterpillar and Komatsu.
In July 2026, Sany opened a manufacturing plant in Brazil, producing excavators and commercial vehicles for Latin American customers. The Sany story is considerably more complex than Fuyao’s: heavy equipment lasts a decade or more, requiring a full ecosystem of parts, servicing, financing and distributor networks to sustain.
“Customers who have worked with Caterpillar for 30 years need to be convinced,” said Zheng. “You are not just selling them a machine, you are selling them an ecosystem - and a credible second-hand market.”
The third example is Pop Mart, whose Labubu designer toys became an international cultural phenomenon last year. Zheng described it as the most demanding going-global challenge of all: cultural goods require not just operational excellence but emotional resonance and the ability to connect with diverse local audiences.
“It’s not just the capability of going global,” he said. “It’s also how you understand your customer and understand the culture.”
What separates global brands from exporters?
Mei Bai, CFA, Senior Governance Manager at Tianqi Lithium, emphasized that corporate governance can be an underappreciated differentiator.
When entering foreign markets, how a company engages with local communities, environmental standards and regulatory regimes really matters, she said. “Building a company’s social license is equally important as upgrading technology and product strength.”
The gap between intention and execution can be wide. Songjie Wang, CFA, Partner and Portfolio Manager at Shenzhen Dragon Pacific Capital, cited a survey suggesting that a large proportion of Chinese firms going global lack a comprehensive overseas risk management system.
The companies most likely to succeed, said Wang, “are shifting from opportunity-led to capability-led expansion” — building standardized systems for global finance, tax, compliance and talent, and investing in sustained marketing, service infrastructure and product adaptation over many years. “Global brands are built over a decade,” he said, “not captured in one strong export year.”
That long-term investment extends beyond systems and infrastructure. Xueshi Bai pointed to Korea and Japan, whose cultural exports — K-pop, anime, cinema — helped build global consumer credibility, which, in turn, allowed their brands to scale internationally in ways that product quality alone could not achieve. “This is why Korea and Japan have successfully changed their image from global factory to global brands,” he said.
Xia said that China could do the same, citing the “Cool China 2049” scenario envisioned by Kevin Kelly, founding executive editor of Wired, which suggests the country could become a global cultural and technological influencer by the middle of the century.
“The surprise may come from soft things or cultural things, not just hardware,” said Xia.
Wang identified pricing power as one of the clearest signals of genuine brand equity. "Can the company charge more overseas than at home?" he said. “Exporting volume at thin margins is commodity trade; premium pricing signals brand equity.”
What should investors watch out for in China’s overseas growth?
China’s going global story is easy to misread.
Xueshi Bai said one common mistake is to interpret factories relocating to Vietnam or Mexico as China deindustrializing. This is better understood as vertical integration, he said, with China retaining the high-value activities while lower-margin assembly moves elsewhere.
Wang cautioned against a subtler error: underestimating how China’s intensely competitive business environment can forge global champions.
“Companies surviving China’s domestic price wars arrive abroad with cost structures and iteration speed that incumbents struggle to match,” he said. “Foreign investors often model them as cheap exporters when they are actually battle-hardened operators.”
Meanwhile, Xueshi Bai said that some investors focus only on the risks created by current geopolitical shifts while overlooking the opportunities they are also creating.
In his view, as the US dollar's dominance as the sole global reserve currency gradually gives way to a more multipolar currency system, the internationalization of the renminbi - with offshore renminbi centers already operating in Hong Kong and Shanghai - could prove one of the most significant structural opportunities in China's global expansion.
To learn more about China investment trends, explore these stories:
Where AI meets manufacturing: China’s next investment frontier
Unpacking China’s vision for its capital markets
China’s role in supplying the clean energy transition
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