Hundreds of Chinese companies are listed on U.S. markets. But which are the best Chinese stocks to buy or watch right now? Weibo (WB), Sohu (SOHU), Nio (Nio), BYD Co. (BYDDF) and Li Auto (LI).
China is the world’s most-populous nation and the second-largest economy with a booming urban middle class and amazing entrepreneurial activity. Often dozens of Chinese stocks are among the top performers at any given time, across an array of sectors.
But with China’s crackdowns on Didi Global (DIDI), for-profit education firms and other sectors, U.S.-listed Chinese stocks have been hammered in recent weeks, adding to a weak 2021. While Beijing has signaled it would like stocks to stabilize, it’s also continuing to levy restrictions and increase oversight on the private sector.
Best Chinese Stocks Across Many Industries
As the world’s largest internet market, it’s no surprise to see big growth from China stocks focusing on e-commerce, messaging or mobile gaming. Notable Chinese internet stocks include:
Tencent Music Entertainment (TME)
Dada Nexus (DADA)
KE Holdings (BEKE)
In electric vehicles, several Chinese companies are becoming serious rivals to Tesla (TSLA) in the world’s biggest auto market.
Xpeng Motors (XPEV)
Li Auto (LI)
BYD Co. (BYDDF)
Several Chinese financial firms or brokerages listed in the U.S.
Futu Holdings (FUTU)
Up Fintech Holding (TIGR)
360 Digitech (QFIN)
Noah Holdings (NOAH)
Several China stocks are in solar power.
Daqo New Energy (DQ)
For-profit education Chinese stocks are a notable non-tech sector.
New Oriental Education (EDU)
Tal Education (TAL)
17 Education & Technology Group (YQ)
Gaotu Techedu (GOTU), formerly known as GSX Techedu.
Don’t forget stocks in other fields, such as riding-hailing firm Didi Global (DIDI), beauty products maker Yatsen (YSG) or data-center operator GDS Holdings (GDS).
Beijing Crackdown On Chinese Stocks
Investors should be aware of significant risks with investing in Chinese stocks. The authoritarian state and its regulators can impose sweeping restrictions, fines or bans on major companies, often with little notice or transparency.
That risk has been very apparent over the last several months.
Alibaba ran afoul of regulators in late 2020, with regulators opening probes into internet platforms and suspending the Ant Group IPO. In April, China fined Alibaba $2.8 billion for anti-competitive actions and ordered it to change various practices. Alibaba affiliate Ant Group limiting the scope of some of its businesses to comply with regulators’ demands.
Further antitrust probes and fines are likely for other internet giants.
China’s cybersecurity regulator earlier this month ordered app stores to remove Didi Chuxing, just days after Didi Global (DIDI) held one of the biggest U.S. IPOs in years. The cybersecurity regulator said Didi violated restrictions on the collection and usage of personal information, but didn’t offer any specifics. That came just days after regulators announced a probe and ordered Didi to suspend new user sign-ups.
More broadly, China will impose cybersecurity reviews on internet and data-centric companies listing overseas. Hong Kong listings appear to be exempt, suggesting far fewer Chinese companies listing in the U.S. going forward. Many big U.S.-listed Chinese companies already have secondary listings in Hong Kong.
For-profit school operators, including New Oriental Education (EDU), TAL Education (TAL) and Gaotu Education (GOTU), crashed on July 23 as Beijing mulled whether to make after-schooling tutoring firms nonprofit. These stocks had already fallen sharply in 2021 as regulators and leaders signaled new restrictions.
Beijing later confirmed for-profit restrictions, triggering continued huge losses in Chinese school stocks and big losses among U.S.-listed China stocks. China also is setting new rules on app-based delivery firms and has signaled it may target the property sector. Finally, Beijing has hinted at even tougher rules for Hong Kong and Macau.