Emerging Markets, Stocks

Why Are Chinese Companies Going Abroad?

Only this month, June 2015, EMerging Equity reported the following:

June 2, Alibaba opened operations in Russia.

June 14, Xinhua news agency noted that “Alibaba has expressed interest in doing business in Latin America with a particular eye on Mexico, Brazil and Argentina.

June 16, EMerging Equity noted that “Chinese online retailer JD.com (Jingdong Mall) has chosen Russia as the first overseas market for its expansion, said company’s official Victor Xu. The firm aims to become an e-commerce leader in the Russian market within five years,” according to RT.

June 19, according to Cloud News Asia, we read that Alibaba had managed to secure some cloud computing government related deals.

Our point is, there is no week China’s e-commerce companies were not active on the international commercial scene. They constantly keep looking for business opportunities abroad.

It’s worth noting that China’s e-commerce model has been very successful so far and the China’s retail market is expected to be worth $10.3 trillion by 2018, compared to the $5 trillion in sales projected for North America. So why not to expand it offshore?

Here is the latest piece by Frontier Market Strategy explaining the reasons why generally Chinese companies go abroad. Enjoy the article.

Rising Powers

We know Chinese firms are expanding overseas at an unprecedented rate, but what is driving them them to do so?

It is well established that Chinese companies are investing abroad in ever greater numbers, but many would question the reasoning for this when China remains a booming market, enjoying rocketing growth and with many underdeveloped regions in the west of the country, and as a lower middle income country has plenty of “room” for further growth before reaching western levels of prosperity. Below I examine the carrots and sticks which are influencing Chinese firms in their quest for new markets.

Offshoring: for so long China has been the beneficiary of this trend, now rising wages in China mean that firms particularly in the textile and footwear industries or “low-tech” industries are looking to relocate to less expensive regions. Books like The End of Cheap China by Shaun Rein have…

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About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity


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