THIS MATERIAL IS A MARKETING COMMUNICATION.
China’s Global Leaders in Manufacturing Sector
In recent years, more and more Chinese companies have emerged as global leaders in manufacturing sector. In this article we will explore the key reasons behind this trend.
Talent and infrastructure support global companies
China has been investing heavily in building up strong infrastructures to support its manufacturing sector. In 2018, US infrastructure spending as a percentage of GDP was 2.62%, compared to 19.6% in China. China’s infrastructure spending was RMB 17.6 trillion, 4.7 times the size of US infrastructure spending over the same period. (Wind, 2020) With sufficient investment, a modern network of expressway, railroad and other infrastructures have been built in China. As wages have been going up in China, the quality of talent has also improved with more college graduates every year. The combination of solid infrastructure and abundant human capital supply continues to fuel local manufacturing sector.
Companies are moving up the value chain and gaining market share
China started from providing relatively low value-added, labor intensive manufacturing services. Over the past 20 years, companies like Huawei, Lenovo, and Xiaomi have emerged to move up the value chain and build up global brands. In smartphone sector, the top four Chinese brands combined made up 44% of global shipment in 2020 (IDC, 2021). In PC sector, Lenovo has been the largest PC supplier for multiple years, and in 2020 it had 25% market share in terms of shipment (Gartner, 2021). In telecom equipment sector, Huawei and ZTE combined had around 36% market share globally in 2018. (Dell’Oro Group, 2019) Terminal makers have larger bargaining power over the supply chain which gives China flexibility to support its domestic upstream companies.
Policy support nurtures local industries
The Chinese government has been supportive of its domestic manufacturing industry in a number of ways. The ability to nurture a sub-sector at its infant stage allows manufacturing companies time to develop and compete in the global stage. The LED industry, for example, was dominated by Japanese, Korean, and Taiwanese companies. But since 2009, the Chinese government has provided high subsidies (around 60%) for the purchase of MOCVD (metalorganic chemical vapour deposition) (key equipment) by LED chip manufacturers. The rapid growth of the domestic industry puts significant pressure on price and margin, which has squeezed out other players. Chinese companies had 67% global market share in LED chip by 2018. We see similar support in high-tech manufacturing, such as domestic semiconductor industry.
Growing home market
Domestic companies do not have to look far to find their customers because China has become one of the largest markets in many sectors. In 2020, Greater China was the largest smartphone market globally, accounting for around 27% of global smartphone sales. (statista 2021) China is also the world’s largest auto market with around 21million cars sold in 2019. (statista 2021) Being closer to end demand reduces export/import tax frictions and provides room for companies to expand locally before moving to overseas markets.
Staying Ahead with Mirae Asset’s Latest Insights
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature/ . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary/.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2023. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.