Seventy percent of Chinese companies surveyed have already established overseas operations, with the building of local operating capabilities becoming the dominant approach, a new report has found. The Hong Kong Special Administrative Region is the preferred first stop for most companies harboring global ambitions, according to an industry executive.

The international edition of Chinese Enterprises Going Global: Navigating the Next Phase of Global Growth was jointly released by CPA Australia, the Shanghai National Accounting Institute and Deloitte China, at a forum in Hong Kong on Thursday.

The report found that 52 percent of companies surveyed have more than two years of international experience. Since 2020, Chinese companies have entered a “3.0” phase of global expansion, marked by a more comprehensive international presence and multiple approaches to entering overseas markets.

Sixty-eight percent of respondents have set up overseas subsidiaries or branches to localize operations. Joint ventures with local partners, which can speed up market entry, are used by 33 percent, while 22 percent work through export agents or cross-border e-commerce platforms to reduce entry costs and barriers. This marks a shift from the “2.0” phase of 2016 to 2019, when overseas mergers, acquisitions and investment surged.

Market expansion remains the primary driver of Chinese companies going global, followed by ambitions to build global brand recognition and diversify regional economic risks, the report said.

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Asia is the preferred destination, selected by 74 percent of respondents, with Southeast Asia a particular focus. Europe and South America follow next, chosen by 33 percent and 26 percent of firms surveyed, respectively.

“For Chinese companies I work with, whether in the Guangdong-Hong Kong-Macao Greater Bay Area, the Yangtze River Delta, or the Beijing-Tianjin-Hebei region, going global has become a top priority. It’s not a short-term, improvised (response), but a long-term strategy,” said Collin Jin, president of CPA Australia’s East and Central China Committee and a partner at Deloitte China.

Chinese companies are also changing how they compete overseas. Jin said that as industrial policy increasingly favors emerging, higher-value industries, enterprises are moving away from selling low-priced, undifferentiated products and placing greater emphasis on business innovation.

Leading companies are investing more heavily in research and development, while others increasingly recognize the limitations of relying on traditional competitive strategies in international markets, he added.

“One very clear trend is that the vast majority of mainland enterprises going overseas choose Hong Kong as their first stop,” Jin said.

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He added that the city’s role as an international business hub and global financial center, together with its advantages in tax policy, government efficiency and logistics, makes it an important base for establishing corporate entities and managing international treasury operations.

However, the report identified compliance and risk management, as well as organization and talent as the two most challenging areas for Chinese enterprises in their globalization journey. Overreliance on strategies that worked at home and failure to tailor approaches to different markets are also common pitfalls.

Speaking at the CPA Congress on Thursday, Hong Kong Financial Secretary Paul Chan Mo-po said the SAR connects the mainland’s strengths and opportunities with international capital and global markets.

“We help mainland enterprises navigate international requirements and expand overseas, while offering global investors a trusted and familiar platform to participate in the mainland’s growth,” he said.

Contact the writer at irisli@chinadailyhk.com