Goldman Sachs: Chinese Companies' Overseas Expansion Moves from Periphery to Core; Overseas Market Share Expected to Rise to 31% by 2035

Goldman Sachs: Chinese Companies' Overseas Expansion Moves from Periphery to Core; Overseas Market Share Expected to Rise to 31% by 2035 Goldman Sachs released a research report stating that Chinese companies account for nearly 40% of the global market, which may not be surprising after a decade of domestic substitution. Their share in markets outside China has risen sharply to 18%, with competition advancing from the periphery toward the core market segments of leading global incumbents. The largest share gains for Chinese companies have come from emerging markets, rather than the US and Chinese markets, which are regarded as the most competitive. Chinese industrial products may be more disruptive, but consumer products (B2C) have the highest adoption rates. Although Chinese exports are seen as driving substantial deflation and typically enter markets at an average discount of 30%, after entry, prices subsequently rose in 7 out of 11 industries. When market demand and revenue expand, prices tend to remain stable or rise, and only decline when revenue pressure triggers it. Capital markets ruthlessly punish share loss, but incumbents' market value losses are not always reflected as gains for Chinese companies. By 2035, Chinese companies' market share will further rise to 31%, with revenue growing 3.6 times, benefiting "latecomers." Goldman Sachs believes the path will be harder and the pace slower, as the competitive arena shifts toward core segments, where incumbents' moats are widest. Competitive response is crucialif incumbents cede peripheral markets or low-margin products, they may give Chinese newcomers a beachhead from which to move upmarket. The next round of price compression is most likely to be catalyzed by weak demand, and Goldman Sachs believes RVC and autos face the most immediate risk. Finally, the market has not yet priced in China's global growth opportunity, with some industries trading below 1x price-to-sales outside China.