Attracting global investment: New strategies for Chinese companies

Editor's note: Oscar Wang is a senior managing director at the global CEO advisory firm Teneo. The article reflects the author's opinions and not necessarily the views of CGTN.

Without a doubt, the investment market landscape in 2024 will be more complex compared to 2023. According to the latest Vision 2024 CEO and Investor Outlook Survey by Teneo, more than 90 percent of investors are expecting an improvement in the macroeconomic outlook for the first half of 2024, up from 72 percent last year, indicating that they do not expect a hard landing of the global economy in the short term.

However, concerns about uncertainty still play a significant role in investors' medium- to long-term decision-making and short-term strategies. What has topped the investors' watch list include the monetary policy direction of the Federal Reserve, inflation level in European markets, and the recovery speed of the Chinese market.

Additionally, progress in global technological innovation, the further commercialization of generative artificial intelligence (AI), and breakthroughs in life sciences are continuously reshaping how investors value technology companies.

In this context, Chinese companies, whether listed or unicorn companies preparing for their next round of fundraising, have demonstrated profound resilience. They are actively seeking "transformation and breakthroughs", ensuring progressive and sustained business growth. For many of them, the globalization of their businesses is no longer a choice but a necessity.

In the past year, the rapid rise of cross-border e-commerce platforms, such as AliExpress and Temu, along with the success of Chinese electric vehicle (EV) companies in the international market, has made Chinese entrepreneurs realize the immense potential of global expansion. This has also provided international investors with a fresh perspective on the competitiveness and investment potential of Chinese companies.

Looking ahead to the investment outlook for Chinese equities in 2024, most global institutional investors hold a neutral to relatively optimistic attitude. Chinese equities are highly attractive as an essential asset class for international institutional investors. Moreover, the recovery of China's consumer sector and the ambitious innovation we are seeing among Chinese companies, present unique investment opportunities.

The robust and agile strategies of Chinese companies enable them to gain a competitive advantage in the international market. However, to establish long-term trusting relationships with international investors, secure crucial capital support, and promote positive governance, they must adapt to the changing times.

From our observations, Chinese companies in particular need to pay attention to the following areas of investor dynamics:

International investors are keenly exploring the potential of "new champions" in specific fields of the China market that demonstrate high innovative efficiency and can expand quicker than their peers. However, these new champions may lack experience in engaging with investors. They should effectively gain investor recognition for complex profit models and new market entry strategies during communication.

Given that external macro environment and volatility are agnostic and impact all companies, it is key that management articulates the bottom-up approach the company has adopted. This ensures differentiation and cuts through the market noise, ultimately attracting interest and capital from international institutional investors seeking exposure to the growth of the Chinese economy.

An increasing number of investors now prefer using the price-to-book (P/B) ratio rather than the price-to-earnings (P/E) ratio for valuation. In industries facing significant regulatory changes internationally, such as the EV and technology industries, investors are also factoring in risk considerations in their valuation expectations.

Last but not least, as we enter 2024, there is an increasing call for an aggressive push for net-zero carbon emissions and the prevention of biodiversity loss. As Chinese companies actively expand into international markets, they will inevitably encounter a broader range of stakeholders, particularly in the ESG field. These stakeholders include local regulatory agencies, policymakers, industry organizations, and investors, among others. Effectively communicating with these stakeholders, allocating sufficient resources, and pursuing smart engagement and collaboration will be important agendas for many companies in 2024.

The next twelve months are expected to be more complex and dynamic for Chinese companies and investors alike. Company leaders not only need determination and leadership to seize growth opportunities in the market but will also need to demonstrate their strategic vision, in order to establish and enhance long-term trust with investors.

In the current market environment, investors value companies that have effective growth and profitability strategies, a straightforward equity story, risk defense capability, and sustainable development competency. In the transition of market cycles, it is always a winning strategy to strengthen investor relations and secure capital support for the long run.