Chinese companies aren't winning overseas just because they're cheaper, Goldman Sachs says

A widely held belief about China's export surge may be misguided, according to Goldman Sachs. While the country's consumer technology firms often begin production at a lower cost, their prices tend to increase as their quality improves, the investment bank says, challenging one of the main assumptions behind China's export boom.

Trina Chen, co-head of Greater China equity research at Goldman Sachs, noted that "intuitively, I think we would all associate with the Chinese product, with price deflation, price cuts, but Goldman found Chinese products often become more expensive after entering foreign markets, partly as their quality improves." The findings contradict the notion that Chinese firms secure overseas markets by continually undercutting rivals on price.

The analysis was conducted on 11 sectors and involved 40 Chinese and global companies. Goldman's research found that Chinese products typically enter new markets at about a 30% discount to incumbents, but prices often rise in subsequent years due to factors such as inflation, economic cycles, and product quality improvements. For instance, Chinese electric vehicles sell at around a 20% discount to global counterparts, a gap that has remained stable over the past few years.

Meanwhile, robot vacuum cleaners start at around a 40% discount in the US market but now command a roughly 60% premium as manufacturers innovate and add new functions. Chen emphasized that the discount versus competitors generally remains stable over time. Price cuts typically come later when established competitors struggle to defend their positions in a challenging market environment.

Chinese companies tend to gain market share fastest in modular, consumer-facing, high-growth products, while progress has been slower in mature, interconnected business-to-business markets where trust, servicing networks, and local distribution channels play a significant role.