Chinese consumer brands are making waves in global markets, and they have a secret weapon that sets them apart from their Asian competitors: the vast ethnic Chinese diaspora. According to a new study from Bain & Company, Chinese companies are leveraging this substantial overseas population to gain a significant edge in international markets.
In a report released this week, Bain & Company highlights that Chinese brands are capitalizing on the large ethnic Chinese communities spread across various countries. The study, which analyzed data through 2023 from 150 publicly traded consumer goods companies headquartered in the Asia-Pacific region, reveals that this demographic advantage provides Chinese brands with a unique and disproportionate opportunity for global expansion.
David Zehner, senior partner at Bain, notes that the overseas ethnic Chinese population is so sizable that it offers Chinese companies a considerable advantage over their South Korean and Japanese counterparts. With a large portion of their revenue growth now coming from international markets, Chinese companies are strategically targeting these communities as a starting point for broader global outreach.
The Diaspora Advantage
The Chinese diaspora comprises approximately 60 million people living outside mainland China, according to United Nations estimates. In the U.S., there are around 5.2 million people of Chinese descent, while Singapore’s ethnic Chinese population makes up about 74% of its 5.92 million residents. This substantial presence provides Chinese brands with a built-in market for their products as they expand globally.
Chinese companies, such as Xiaomi and Alibaba, have been aggressively pursuing international markets to counteract sluggish domestic growth. Xiaomi, for instance, derives over 40% of its revenue from abroad, while Alibaba’s international e-commerce operations are growing rapidly, now ranking as its second-largest business segment.
Despite these successes, the study reveals that Chinese consumer companies still lag behind their South Korean and Japanese peers in terms of revenue from international markets. In the fast-moving consumer goods sector, Japanese firms have seen at least 10% of their revenue come from abroad, with some exceeding 50%. South Korean companies have also reported 10% to 50% of their revenue from international sales. In comparison, Chinese firms are still ramping up, with many generating less than 10% of their revenue from overseas markets.
Rising Stars and Strategic Moves
The potential for growth is evident. Chinese companies like Haier and robotics startup Keenon are rapidly expanding their global footprint. Retailer Miniso, for example, recently opened its largest store in Jakarta and celebrated record-breaking first-day sales. Miniso’s international revenue surged by 35.5% in the last quarter, highlighting the brand’s growing influence.
However, the path to international success is not without challenges. Chinese tea brand Chagee faced difficulties entering the Singapore market through a local partner and has now opted for direct ownership of its stores to improve its strategy. This situation underscores the importance of adaptability and local market understanding.
Cultural and Strategic Adaptations
The journey to global success requires more than just leveraging a large diaspora. Chinese brands must also navigate cultural differences and adapt their strategies for diverse markets. Zehner emphasizes that companies need to approach international growth with a long-term perspective and avoid expecting immediate returns from marketing investments.
The key to winning in global markets lies in rapid learning and flexibility. Companies that can effectively adjust their strategies to local preferences and market conditions will be the ones to secure the greatest rewards.
As Chinese consumer brands continue to expand their international presence, their ability to harness the power of the global ethnic Chinese community will likely play a crucial role in shaping their global success.
