Chinese stocks have gained significant traction in the U.S. markets, luring American investors who have reaped substantial profits in recent years.
Despite enduring a challenging period marked by China’s regulatory scrutiny, particularly impacting tech companies, the outlook for these stocks appears promising in 2023.
With China’s ascent as an economic powerhouse, these companies are set to play a pivotal role in the country’s development.
In the coming decade, we anticipate these stocks reaching a level of prominence comparable to tech giants such as Apple, Microsoft, and Facebook.
Chinese corporations dominate various sectors, including technology, semiconductors, fintech, and automotive.
Investors seeking exposure to these industries recognize the appeal of Chinese stocks, given their attractive valuations and expanding market share.
Consequently, the current landscape presents an excellent opportunity for investors to consider buying into these stocks.
Features To Look for In Chinese Stock
For evaluating Chinese stocks, assessing the global footprint and revenue growth are crucial factors.
A global presence demonstrates the company’s ability to compete internationally and diversify risk.
On the other hand, consistent revenue growth for such stocks indicates a strong business model and the potential for long-term success.
Look for companies that have a strong presence in international markets, as this indicates their ability to compete on a global scale.
Factors such as overseas subsidiaries, partnerships, and exports can give insight into a company’s ability to tap into diverse markets and generate revenue beyond China’s borders.
A global footprint can also provide a buffer against economic downturns in the domestic market, diversifying risk for investors.
One of the key indicators of a promising Chinese stock is consistent revenue growth. Look for companies that demonstrate a track record of increasing revenues over time.
This growth can be fueled by expanding product lines, successful market penetration, or acquisitions.
Analyze the company’s financial statements and assess its revenue growth in relation to its industry peers.
It is important to consider both top-line growth and the sustainability of revenue streams.
Companies with diverse revenue streams and a strong customer base are more likely to weather market fluctuations and provide long-term returns for investors.
Best Chinese Stocks to Buy Now
In this article, we highlight the 5 best Chinese stocks to buy now. All of these stocks are expected to benefit from the rising demand for Chinese products and services.
In addition, they are also well-positioned to capitalize on the Chinese government’s increasing focus on investing in innovation.
Investing in these stocks now could be a great way to get in on the ground floor of the Chinese market.
Li Auto Inc (LI)
Li Auto Inc (NASD: LI), a prominent Chinese electric vehicle (EV) manufacturer, has emerged as a formidable competitor to Tesla and other players in the U.S. market.
Known for its flagship model, the Li-One SUV, the company has witnessed remarkable sales growth.
Setting itself apart as a hybrid vehicle, the Li-One combines an electric motor with a small gasoline engine, effectively extending its driving range.
According to this Chinese stock data, in June 2023, Li Auto achieved a significant milestone by delivering an impressive 32,575 electric cars.
That indicates a remarkable 150% growth compared to the same month in the previous year.
Furthermore, in Q1 2023, the company reported a substantial revenue of $2.74 billion, showcasing a noteworthy year-over-year growth of 96.5%.
Building on this success, Li Auto aims to reach a milestone of delivering 40,000 vehicles per month by Q4 2023.
Li Auto, at the Shanghai Auto Exhibition, revealed its autonomous driving and electric vehicle (EV) plans.
They will beta test the NOA self-driving system in Q2 2023 with Li AD Max 3.0 technology. By year-end, the technology will be introduced in 100 cities.
By 2025, Li Auto plans to offer a flagship vehicle, five extended-range EVs, and five high-performance EVs.
They aim to expand their charging infrastructure to include 300 stations by 2023 and 3,000stations by 2025, alongside their existing retail and service centers.
As the global demand for electric vehicles continues to soar, Li Auto remains an attractive investment opportunity and one of the top Chinese stocks to consider.
NetEase Inc (NTES)
NetEase Inc (NASD: NTES) is a Chinese internet company which offers a wide range of services.
Those encompass social media content, community platforms, communications tools, and e-commerce solutions.
While it has been profitable, its growth has faced challenges due to the Chinese government’s crackdown on video games.
Recently, NetEase partnered with Warner Bros. Games to release the highly anticipated Harry Potter: Magic Awakened.
It was a free-to-play collectible card roleplay game (RPG) set in the wizarding world.
Co-developed and co-published under the label Portkey Games, the title aims to immerse players in their own magical adventure.
Gaming sector in China, recently received publishing licenses for 89 domestic online video games from China’s gaming regulator. Among these licenses were titles developed by NetEase.
Furthermore, their online music platform, NetEase Cloud Music, achieved tremendous success by surpassing 300,000 digital copies sold.
That also topped the platform’s gross sales charts with the latest mini-album from (G)I-DLE, a popular South Korean girl group.
Expanding its gaming division, NetEase Games established a new game studio called PinCool, Inc. (PinCool) in Tokyo, Japan.
The studio consists of industry experts with diverse backgrounds in interactive entertainment, including video games, movie creation, live events, and IP licensing.
NetEase’s robust research and development capabilities enable the company to launch captivating metaverse video games.
In the first quarter of 2023, it reported earnings of $983.6 million, representing a year-on-year increase, while its revenue grew by 6.3% to $3.6 billion.
As a popular growth investment, this Chinese stock data shows potential for double-digit revenue growth in the foreseeable future.
This makes NetEase an appealing choice among the best Chinese stocks to buy for long-term investors in the Chinese market.
XPeng Inc (XPEV)
XPeng Inc (NYSE: XPEV) is a prominent Chinese electric vehicle (EV) manufacturer that stands out by integrating AI and autonomous driving technologies into its smart EVs.
With a focus on the mid-to-high-end market segment, the company has gained significant popularity.
In June 2023, XPeng achieved notable growth, delivering 8,620 Smart EVs, marking a 15% increase compared to the previous month.
The P7 series deliveries specifically saw a 17% rise. Impressively, this marked the fifth consecutive month of positive delivery growth.
Throughout the second quarter of 2023, the total Smart EV deliveries reached 23,205 units, reflecting a substantial quarter-over-quarter increase of 27%.
As of June 30, 2023, XPeng has already delivered over 300,000 Smart EVs.
XPeng debuted its highly anticipated G6 Ultra Smart Coupe SUV, attracting significant market attention with five trim options priced competitively from RMB209,900 to RMB276,900.
The G6 garnered excellent reviews and is set for initial deliveries in July, with test drive vehicles already available nationwide.
By including advanced ADAS function XNGP in the G6 Max versions, XPeng’s stock surged over 11%, given the 20% lower price compared to Tesla’s Model Y in China.
Seeking to revive lackluster sales following May’s performance, XPeng aims to sell around 10,000 G6 units monthly.
This will provide the company with further boost of 520 billion Yuan tax break for new energy vehicles.
In the future, XPeng plans to introduce “AI Valet Driver” capabilities, enabling users to personalize smart driving routes in major Chinese cities.
This will solidifies XPeng’s position as the sole automaker offering City NGP functions in Guangzhou, Shenzhen, Shanghai, and Beijing.
With the thriving EV market, XPeng is strategically positioned to increase its sales in the current year.
Furthermore, the company’s ambitions in robotics, autonomous driving, and flying vehicles hold the potential to create significant shareholder value beyond the EV business.
Consequently, XPEV presents an appealing investment opportunity in the Chinese market, making it worth considering for long-term investment strategies.
JD.com Inc (JD)
JD.com Inc (NASD: JD), the Chinese e-commerce giant, has faced its fair share of challenges due to Chinese regulations, but it is demonstrating more resilience compared to its rival Alibaba.
In a strategic move, JD.com intends to establish retail grocery stores by merging its 7Fresh supermarket unit with other business lines like Pinpin, its group-buying arm.
JD.com’s new division will go beyond physical stores and explore innovative retail models. Yan Xiaobing, formerly of JD.com’s international division, will lead the venture, reporting to CEO.
This development follows JD.com’s 20-year blueprint, unveiling plans to create seven enterprises valued at over 100 billion yuan ($13.83 billion) each.
In the competitive Chinese market, JD.com faces rivals like Alibaba Group, Pinduoduo, and Douyin (Chinese TikTok).
JD.com launched 7Fresh in response to Alibaba’s Freshippo. Last month, Alibaba announced an IPO process for Freshippo amid restructuring.
JD.com also spun off its logistics unit and plans to do the same with its property and industrial units.
During China’s mid-year shopping festival, JD.com’s e-commerce site experienced better-than-expected sales growth of 6-8%, surpassing Citi’s projections of 2-5% growth.
However, this growth was lower than the previous year’s gross merchandise value (GMV) growth of 10.3% and the growth of 27.7% observed in 2021.
The Chinese stock data highlighted significant profitability growth in the first quarter of 2023, driven by operational streamlining, product portfolio optimization, and service expansion.
Net revenues for the quarter reached $35.4 billion, marking a 1.4% increase compared to the same period in 2022.
Net service revenues rose by 34.5% to $6.9 billion, while net income attributable to ordinary shareholders reached $0.9 billion.
That was a notable improvement from the $0.43 billion net loss in the same period last year.
Considering these developments, investing in JD.com’s stock appears promising for those interested in the Chinese market.
EHang Holdings (EH)
EHang Holdings Limited (NASD: EH) stands as a prominent Chinese multinational holding company, recognized as the global leader in autonomous aerial vehicle (“AAV”) technology.
Their offerings encompass a range of AAV products and commercial solutions, catering to various industries such as urban air mobility (UAM), and smart city management.
Pioneering cutting-edge AAV technologies and commercial solutions within the UAM industry, EHang continually pushes the boundaries of flight to enhance our lives in smart cities.
Recently, EHang disclosed its unaudited financial results for the first quarter ending on March 31, 2023.
Notably, their total revenues reached RMB22.2 million (US$3.2 million), reflecting a growth of 41.6% compared to the previous quarter’s RMB15.7 million.
Additionally, the net loss decreased to RMB87.0 million (US$12.7 million), marking an improvement of 21.0% from the fourth quarter of 2022.
In March 2023, EHang forged a strategic partnership with Xi’an Aerospace Investment Technology Innovation Development Holding Group Co., Ltd.
The firm is a subsidiary of Xi’an Aerospace Investment Co., Ltd. (“XAIC”)and the deal was sponsored by the Xi’an municipal government.
This partnership focuses on urban air mobility and smart city management, with EHang securing an indicative purchase order for 20 units of EH216-S.
The fulfillment of this order is expected to conclude by 2025.
Furthermore, EHang achieved a significant milestone in February 2023, as their EH216-S successfully completed a significant demonstration.
It completed an inaugural passenger-carrying autonomous electric vertical takeoff and landing (“eVTOL”) flight demonstration in Oita, Japan.
This demonstration received approval from Japan’s Ministry of Land, Infrastructure, Transport and Tourism (“MLIT”).
Subsequently, EHang joined Japan’s Public-Private Committee for Advanced Air Mobility (“AAM”) in April 2023.
It is a platform established by Japan’s Ministry of Economy, Trade and Industry (“METI”) and MLIT to facilitate the adoption of flying vehicles in Japan.
With these groundbreaking accomplishments and a remarkable 75% increase over the past year, EHang solidifies its position as a prominent Chinese stock to consider investing in.
We’ve also compiled a list of 20 Chinese stocks that have shown significant growth over the past year.
These stocks have performed well and are expected to continue to show gains in the future. We recommend investors include these stocks in their portfolios for maximum returns.
|MINISO Group Holding Limited
|SunCar Technology Group Inc.
|Auto & Truck Dealerships
|Hello Group Inc.
|Internet Content & Information
|Jiayin Group Inc.
|Internet Content & Information
|China Automotive Systems, Inc.
|New Oriental Education & Technology Group Inc.
|Education & Training Services
|Baijiayun Group Ltd
|Software – Application
|Vipshop Holdings Limited
|GreenTree Hospitality Group Ltd.
|Tencent Music Entertainment Group
|Internet Content & Information
|Trip.com Group Limited
|Yum China Holdings, Inc.
|Hollysys Automation Technologies Ltd.
|Electrical Equipment & Parts
|TAL Education Group
|Education & Training Services
|Kingsoft Cloud Holdings Limited
|Software – Application
|Brilliant Acquisition Corporation
|Baosheng Media Group Holdings Limited
Also, we’ve compiled a list of 10 Chinese stocks under $5 that have grown significantly in the past year.
These Chinese stocks under $5 are a great way to diversify your portfolio and take advantage of the growth potential in the Chinese market.
We suggest researching each stock thoroughly before investing and monitoring the market closely for any changes.
|Kandi Technologies Group, Inc.
|Green Giant Inc.
|Real Estate – Development
|Gaotu Techedu Inc.
|Education & Training Services
|Sunrise New Energy Co., Ltd.
|Electrical Equipment & Parts
|Yiren Digital Ltd.
|Education & Training Services
|CNFinance Holdings Limited
|Leju Holdings Limited
|Real Estate Services
How To Buy Chinese Stocks As A Foreigner Outside China?
Investing in stocks as a foreigner residing outside of China may seem daunting at first, but with the right approach, it can be accomplished. Here are some steps to help you buy these stocks:
Research and Choose a Broker
Look for a reputable international broker that offers access to the Chinese stock market. Ensure that the broker provides services for foreign investors and has a user-friendly platform.
Complete Required Documentation
Open an account with the chosen broker and complete the necessary paperwork, including providing identification documents and fulfilling any other requirements specified by the broker.
Fund Your Account
Transfer funds into your brokerage account to have capital available for investing. Follow the broker’s instructions for depositing money into your account.
Familiarize Yourself with The Chinese Stock Market
Gain knowledge about the Chinese stock market, its major exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange, and the listed companies.
Stay updated on market trends, news, and economic indicators that could impact your investment decisions.
Choose Suitable Stocks
Conduct thorough research on Chinese companies to identify potential investment opportunities.
Analyze financial reports, and consider the company’s performance, growth prospects, competitive position, and other relevant factors. Diversify your portfolio to mitigate risks.
Place Your Trades
Enter the stock symbol, specify the quantity you want to purchase, and set any desired limits or conditions for the trade.
Monitor Your Investments
Stay vigilant and monitor your investments regularly. Track company news, earnings reports, and market developments. Adjust your portfolio as needed based on changing circumstances.
Understand Tax Obligations
Be aware of any tax implications or reporting requirements related to investing in Chinese stocks as a foreigner.
Consult with a tax professional to ensure compliance with the relevant regulations in your home country and China.
Which Broker Can You Use to Invest in China?
Several international brokers provide access for foreign investors to invest in the Chinese stock market. Here are a few popular options:
Known for its extensive global market coverage, Interactive Brokers offers access to various Chinese exchanges, including Shanghai, Shenzhen, and Hong Kong.
They provide a wide range of investment products and competitive pricing.
This brokerage firm offers access to stocks of China-based firms through its platform.
TD Ameritrade provides research tools, educational resources, and a user-friendly trading experience.
As a well-established brokerage, Charles Schwab allows investors to trade China-origin stocks.
They offer a range of investment options, educational materials, and excellent customer support.
ETRADE provides access to stocks listed on major Chinese exchanges. They offer a user-friendly platform, research tools, and a wide range of investment products.
Fidelity allows investors to trade stocks on China’s major exchanges. They provide comprehensive research, educational resources, and competitive pricing.
How Often Do Chinese Dividend Stocks Pay A Dividend?
The frequency of dividend payments by Chinese stocks varies depending on the individual companies.
Generally, Chinese dividend stocks follow a semi-annual or annual dividend payment schedule.
However, it’s important to note that not all Chinese companies pay dividends, as some may choose to reinvest profits back into the business or allocate funds for future expansion.
For those companies that do pay dividends, the majority typically distribute dividends on a semi-annual basis.
They announce dividends after releasing their financial reports, often in conjunction with their annual general meetings.
The first dividend payment is commonly made around the middle of the year, while the second payment occurs toward the end of the year.
How Big Is the Chinese Stock Market?
The Chinese stock market is one of the largest and most influential in the world.
It comprises two primary stock exchanges: the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE).
Combined, the Shanghai and Shenzhen Stock Exchanges have significant market capitalization. The total market capitalization of both exchanges was around $15 trillion.
However, it’s important to note that market capitalization values can fluctuate significantly over time due to market conditions and investor sentiment.
Given the size of the Chinese stock market and its importance in the global economy, it attracts both domestic and international investors seeking exposure to the Chinese.
Chinese Dividend Stocks Vs. American or European Dividend Stocks?
When comparing Chinese dividend stocks to American or European dividend stocks, several key differences emerge.
Dividends play a significant role in American and European markets, with many companies having a long history of consistent dividend payments.
Dividend payments are deeply ingrained in the investment culture and are often considered a measure of a company’s financial health.
In contrast, the dividend culture in China is still evolving, and many Chinese companies reinvest profits for growth or strategic purposes rather than distributing them as dividends.
Dividend yields in the Chinese market tend to be lower on average compared to American or European markets.
Chinese companies often allocate a smaller proportion of their earnings to dividends, primarily due to the preference for reinvestment.
Consequently, investors seeking higher dividend yields may find more attractive opportunities in American or European dividend stocks.
American and European markets generally have a longer history and more mature regulatory frameworks compared to the Chinese market.
This maturity often translates into higher investor confidence, established corporate governance practices, and greater transparency.
While the Chinese market has made progress in these areas, it may still be perceived as relatively riskier by some investors.
Chinese dividend stocks tend to be concentrated in specific sectors such as utilities, financials, and real estate.
In contrast, American and European dividend stocks span a broader range of sectors, including consumer goods, healthcare, technology, and industrials.
This sectoral difference may influence the diversification opportunities available to dividend-focused investors.
What Is the Biggest Risk of Investing in Chinese Stocks?
Investing in these stocks entails various risks that investors should be aware of. Here are some of the most significant risks associated with investing in stocks of China-origin firms:
China-based stocks are denominated in the Chinese Yuan (CNY).
As a foreign investor, fluctuations in the exchange rate between the CNY and your home currency can impact your investment returns.
Currency risk adds an additional layer of volatility and uncertainty to investing in these stocks.
The stock market in China is influenced by political factors. Changes in government policies, regulations, or political stability can affect market sentiment and company valuations.
Political events or tensions can introduce a level of unpredictability that investors need to consider.
Chinese stock markets operate under a regulatory framework that may differ from those in other countries.
Regulatory changes or interventions by the Chinese government can impact market conditions and investor confidence.
Examples include restrictions on capital flows, changes in listing requirements, or regulatory crackdowns on specific industries or companies.
The performance of these stocks is closely tied to the overall Chinese economy. Factors such as GDP growth, inflation, interest rates, and trade dynamics can impact stock prices.
Economic slowdowns or disruptions, both within China and globally, can have adverse effects on these stocks.
Corporate Governance Risk
Corporate governance standards in Chinese companies may vary, which can pose risks for investors.
Some companies may lack transparency, have complex ownership structures, or face challenges related to shareholder rights.
Diligent research and due diligence are essential to assess the quality of corporate governance in China-origin stocks.
Some stocks may experience lower trading volumes and liquidity compared to stocks in more developed markets.
This liquidity risk can make it challenging to buy or sell shares at desired prices, especially for larger positions.
Investors should consider the liquidity of individual stocks before making investment decisions.
What Happens If Chinese Stocks Are Delisted?
If these stocks are delisted from foreign exchange, it can have significant implications for investors.
Delisting occurs when a company’s shares are removed from trading on a particular stock exchange.
The reasons for delisting can vary, including non-compliance with listing requirements, bankruptcy, mergers or acquisitions, or regulatory actions.
When a Chinese stock is delisted, several potential scenarios may unfold:
Move To Over-The-Counter (OTC) Markets
Delisted stocks of Chinese firms may continue trading on over-the-counter markets, such as the Pink Sheets or OTC Bulletin Board in the United States.
However, trading on these markets typically offers lower liquidity and limited regulatory oversight, potentially impacting the ease of buying or selling shares.
Relisting On Another Exchange
In some cases, delisted stocks may seek relisting on another exchange, either in China or a different foreign market.
This can provide an opportunity for investors to continue trading the shares, but the process and timeline for relisting can vary significantly.
Delisting does not necessarily invalidate shareholders’ ownership of the company. Shareholders typically retain their ownership stakes, although liquidity and market value may be affected.
Shareholders may have the option to sell their shares in alternative markets or through private transactions.
Delisting can impact the level of regulatory oversight and protections for shareholders.
Investors may have limited access to financial information, reduced transparency, and fewer legal avenues for recourse.
Do Chinese Stocks Split?
Yes, like any other stocks in the world, stocks of Chinese firms can also undergo stock splits.
Stock splits occur when a company increases the number of shares outstanding while proportionally reducing the price per share.
Stock splits are generally implemented to adjust share prices, improve liquidity, attract more investors, and enhance marketability.
However, it’s important to note that stock splits do not directly impact the fundamental value of a stock.
The value of an investor’s holdings remains the same after a stock split, although the number of shares and the share price adjust.
How To Short Chinese Stocks?
Short-selling Chinese stocks involves betting on the decline in the price of a stock.
While short selling can be a strategy to profit from falling prices, it is important to note that it carries inherent risks, including the potential for unlimited losses if the stock price rises instead.
Here’s a general outline of the process for short-selling these stocks:
Find A Broker
Choose a reputable international broker that offers short-selling services for Chinese stocks. Ensure that the broker allows short selling and has access to the Chinese stock market.
Check the specific requirements of your chosen broker for short selling.
Brokers may have certain criteria, such as account size, experience, or margin requirements for short-selling activities.
Locate Borrowable Shares
To short a stock, you need to borrow shares from someone who already owns them. The broker facilitates this borrowing process.
However, it’s important to note that not all these stocks may be available for borrowing. Availability can vary based on demand, liquidity, and the broker’s inventory.
Place A Short Sell Order
Once you have located borrowable shares, place a short sell order with your broker. Specify the stock symbol, quantity, and any additional instructions.
The broker will execute the order, selling the borrowed shares in the market on your behalf.
Monitor The Position
Keep a close eye on your short position, as losses can accumulate if the stock price rises. Set appropriate stop-loss orders or other risk management measures to limit potential losses.
Buy To Cover
To close your short position and realize your gains or losses, you need to buy back the shares you initially borrowed. This process is known as “buy to cover.”
If the stock price has declined since you initiated the short position, buying back the shares at a lower price will result in a profit. However, if the stock price has increased, you may incur a loss.
The world of Chinese stocks offers a wealth of opportunities for investors seeking substantial returns.
With China’s robust economic growth, emerging industries, and flourishing tech sector, there are numerous promising companies to consider.
However, success lies in conducting thorough research, understanding market trends, and diversifying one’s portfolio.
It’s important to remember that investing in stocks always carries inherent risks, and careful consideration should be given to individual financial goals and risk tolerance.
By staying informed, being patient, and making wiser decisions, investors can position themselves for potentially significant returns in the dynamically evolving Chinese market.
Should I Invest in Chinese Stocks?
Investing in Chinese stocks can offer great opportunities due to the country’s economic growth and potential for high returns.
However, factors like regulatory changes, geopolitical tensions, and corporate governance issues should be carefully considered.
Diversification, thorough research, and a long-term perspective are key to making informed decisions in this dynamic market.
What Are the Best Chinese Stocks?
The best Chinese stocks encompass a diverse range of sectors, from e-commerce giants like Alibaba and JD.com to tech innovators such as Tencent and Baidu.
Renewable energy firms like Enphase Energy and JinkoSolar also offer promising opportunities. Keep an eye on the evolving Chinese market for potential investment prospects.