Fresh options for Chinese investment

SOUTH AND SOUTHEAST ASIA, 23 JULY 2026 —

Chinese firms are entering a new phase of global expansion, shifting from exporting products to building overseas supply chains and expanding capabilities, reflecting a more mature and diversified global strategy, industry experts said. This new phase is characterized by a more strategic, selective, and diversified approach to outbound direct investment, driven by the need to offset slowly recovering domestic demand, mitigate geopolitical and tariff risks, and internationalize supply chains, production capacity, and technologies.

According to Ning Loh, managing director and head of global credit strategy at Moody's Ratings, Chinese companies have developed strong manufacturing capabilities with cost advantages and very deep and developed domestic supply chains. The country is moving away from lower-value exports to a much broader global strategy around technology and Chinese brands. Loh noted that the latest wave of Chinese outbound direct investment has been focused on supply chain security, clean energy, advanced technologies, and critical minerals, marking a significant shift from earlier waves of investment that centered on securing natural resources and pursuing large mergers and acquisitions in developed markets.

The shift in Chinese investment patterns is evident in the regions and sectors they are targeting. South and Southeast Asia, along with Latin America, have emerged as major destinations for Chinese investment, while North America's share of China's outbound direct investment has declined. The sectoral focus has also changed markedly, with investment increasingly directed toward electric vehicles, batteries, advanced technologies, renewable energy, critical minerals, and electronics. Loh, who has witnessed the transformation firsthand through the rapid rise of Chinese EV brands across Southeast Asia, noted that artificial intelligence is also accelerating the overseas expansion of Chinese companies by enabling them to localize faster, improve customer service, and reduce costs.

The rapid deployment of AI, together with broader technological and innovation upgrades, is expected to fuel a new wave of overseas expansion by Chinese service providers across sectors including technology, logistics, and travel, according to a Moody's Ratings report released on June 10. Loh said that overseas expansion has become an increasingly important strategy for Chinese companies as domestic demand remains relatively weak compared with the country's manufacturing capacity. Expanding abroad allows companies to diversify their markets while reducing exposure to trade tensions and tariffs. At the same time, China is seeking to secure reliable access to critical minerals and key technological inputs needed to support the sectors driving its economic growth.

Sherman Hung, deputy CEO & head of institutional banking group at DBS China, noted that supply-chain diversification is a natural part of Chinese companies' global expansion, driven by the need to expand market reach, maximize profitability, and build resilience. Hung said that companies are optimizing their Asia-Pacific footprint by establishing regional manufacturing and logistics hubs, creating a synergistic model that combines Chinese capabilities with regional nodes. On industrial upgrading, Chinese enterprises have built genuine global competitiveness in renewable energy, EVs, smart equipment, and advanced manufacturing, and their outbound investment increasingly represents an extension and localization of those capabilities, not just a search for cheaper inputs.

Looking ahead, Hung said that the green economy is expected to remain the most prominent investment option, with Chinese companies in clean energy and energy storage leveraging their scale advantages to meet growing global demand. He also highlighted two other areas with significant growth potential: consumer-related sectors in emerging markets and high-end manufacturing, where China's expertise in smart production and factory management is increasingly being adopted overseas. Emerging markets, particularly ASEAN, are becoming the preferred destination for a growing number of Chinese enterprises going global, driven by their growth potential, geographical proximity, cultural affinities, and favorable policies.

The Regional Comprehensive Economic Partnership (RCEP) has further lowered the threshold for Chinese companies entering ASEAN markets, and a defining feature of the current phase of Chinese companies' global expansion is an increasing focus on localized operations. Companies are placing greater emphasis on building brands, channels, and teams within target markets to deeply integrate into the local economy. As Chinese firms continue to expand globally, their investments are likely to have a significant impact on the regional economy, particularly in ASEAN, where they are expected to drive growth, create jobs, and stimulate innovation. With the green economy, consumer-related sectors, and high-end manufacturing emerging as key areas of focus, Chinese companies are poised to play a major role in shaping the future of the regional economy.

In conclusion, the new phase of Chinese global expansion is characterized by a more strategic, selective, and diversified approach to outbound direct investment, driven by the need to offset domestic demand, mitigate risks, and internationalize supply chains. With a focus on supply chain security, clean energy, advanced technologies, and critical minerals, Chinese companies are poised to drive growth, create jobs, and stimulate innovation in the regions they invest in. As the green economy, consumer-related sectors, and high-end manufacturing emerge as key areas of focus, Chinese companies are likely to play a major role in shaping the future of the regional economy, particularly in ASEAN, where they are expected to have a significant impact on the regional economy. With the RCEP in place, the threshold for Chinese companies entering ASEAN markets has been lowered, and companies are increasingly focusing on localized operations, building brands, channels, and teams within target markets to deeply integrate into the local economy.

Related: Moody's Ratings · DBS China · Ning Loh · South and Southeast Asia