In Depth: Chinese Companies Going Global Navigate Into Deeper Waters

Chinese enterprises have been expanding globally, leveraging their status as the world's leading manufacturer. This trend has accelerated due to economic pressures within China and a restructuring of global supply chains, prompting Chinese manufacturers to seek opportunities abroad. This has been characterized by enhanced outbound investments and a strategic shift towards exporting intermediate goods, underscoring China's evolving economic role globally [para. 2][para. 3]. In 2024, China's non-financial outward direct investment (ODI) increased by 10.5% to $143.9 billion. The number of dispatched workers rose by 17.9% to 409,000, indicating significant growth in the infrastructure and construction sectors [para. 3].

Investment in ASEAN countries increased at its fastest rate in 2024, with Singapore, Indonesia, and Thailand as top destinations for investment mainly in advanced manufacturing, new-energy vehicles, and infrastructure [para. 4]. The shift in China's export model now favors intermediate goods—raw materials, components, and semi-finished products—used in overseas manufacturing [para. 5], with significant growth seen in exports of mechanical and electrical intermediate goods to countries like Vietnam and India [para. 6]. Intermediate goods account for 60% to 70% of China's exports, showing a trend towards relocating production capacity abroad [para. 7].

Global supply chains have become decentralized, leading to the "China+1" strategy, initially adopted to reduce reliance on Chinese supply chains. This approach has evolved due to geopolitical tensions like the Russia-Ukraine conflict and U.S.-China tensions [para. 8][para. 9], with Chinese companies adopting similar strategies by building overseas production while maintaining competitive domestic bases [para. 10][para. 11]. ASEAN countries and nearshoring partners like Mexico have become primary destinations for Chinese investment, as companies aim to circumvent trade barriers and cost challenges, although they face higher labor and land costs and geopolitical uncertainties [para. 12][para. 13].

This diversification aims to address U.S. tariff risks. As trade tensions continue, experts predict U.S. tariffs could increase, pushing Chinese enterprises to expand overseas further. Trump's trade policy, marked by increased tariffs, has already impacted China's share in U.S. imports [para. 15][para. 19]. Despite challenges, the U.S. remains China's largest export market, with exports to the U.S. growing by 4.9% in 2024 [para. 16]. However, new tariffs on countries with trade deficits with the U.S. could affect Southeast Asian nations and increase risks for Chinese companies expanding abroad [para. 20].

Emerging market countries are balancing opportunities from Chinese investments while protecting domestic industries, as Western investments may reduce due to Trump's push for manufacturing reshoring. This situation is creating reliance on Chinese capital for Southeast Asian countries, which are also navigating high costs and inflationary risks with U.S. reshoring efforts [para. 27][para. 28][para. 29].

Companies are adapting by adopting non-equity operations like contract manufacturing, reflecting a shift from asset-heavy investments to more flexible overseas expansion strategies [para. 25][para. 26]. This approach responds to rising protectionism and the restructuring of global supply chains, signifying the complex and changing landscape of global trade and manufacturing.