Swiss investment bank UBS on Tuesday said the overseas expansion model of mainland companies had entered its "2.0 phase" as more enterprises shift to localise operations and supply chains in international markets.

In releasing its report, "Asia and China Markets: Key Themes and China's Global Push", the bank also predicted the average proportion of overseas revenue at non-financial A-share companies to further rise to 25 percent by 2030 from 19 percent seen last year.

Speaking at a press conference, head of China research Robin Xu noted the globalisation strategy of mainland companies had "fundamentally changed" as more firms were boosting production capabilities overseas instead of simply ramping up exports.

Some, he added, have also adopted the "China plus One" model to relocate their supply chains to the Asean region to "avoid tariffs", with outbound direct investments by A-share firms in the region rising by seven percent year on year in 2025.

Looking ahead, Xu noted more mainland companies are likely to "go global" in the coming five to 10 years – partly due to higher profit growth in overseas markets and as demand slowed down at home amid increasing competition.

"Obviously, overseas businesses, for a lot of sectors, are higher than their domestic businesses, which means if their overseas revenue grows faster, they get a better margin, or even margin expansions," he said.

"[So] a lot of these sectors will be experiencing faster gross profit growth. That is the whole simple story behind Chinese corporates going global," he added.

The finance veteran also pointed out that consumer goods and clothing, home appliances and technology hardware saw the highest proportion of overseas revenues in general last year, accounting for over 40 percent of total trade in their sectors.

Xu predicts that new energy, automotive, construction machinery and solar panels will see stronger overseas revenue growth in the future and that the same goes for the pharmaceutical industry, which has shown higher profit margins.

His remarks also came as the country's total outbound direct investment rose by 3.9 percent year on year in the first four months of the year, amounting to 429.4 billion yuan across all sectors, according to data released by the Ministry of Commerce on Tuesday.

Meanwhile, domestic investors made a total of around 315.7 billion yuan of non-financial outbound direct investments during the period, representing a decline of almost 14 percent year on year.

Karen Hizon, Asia-Pacific equity strategist at UBS, said developments involving oil prices and artificial intelligence would continue to drive equity market growth in Asia and forecast that oil prices would remain around US$100 per barrel in the short term.


Edited by Tony Sabine