China's 'little giants' - a growing force in China's technology self-reliance and supply chain security
China is making efforts to nurture homegrown innovative SMEs that own specialty technologies and have leading positions in niche markets, in order to strengthen technology innovation and supply chain resilience. It has been fostering specialized, fine, peculiar and innovative SMEs (SFPI SMEs) and uses the term “little giants” to label outstanding companies from the pool.
Currently, 310 of the over 4,700 Chinese ‘little giants’ are listed, primarily in strategically important sectors such as industrials, IT, and materials. These businesses are part of the nation's push to achieve technology independence and strengthen advanced manufacturing capabilities. These stocks reported faster revenue growth and higher gross margin than the broad market and ChiNext companies from 2018 to 2020 and are committed to innovation with more R&D expenditure.
Could industrials including automation and aerospace be a fertile breeding ground for future little giants? The battery sector is highly likely to benefit from higher EV penetration. China continues its domestic substitution technology push, supporting the domestic semiconductor ecosystem. In the healthcare space, medical devices, biological and chemical upstream manufacturing, and the development of in vitro diagnostics (IVD) subsector are three areas to watch. New energy vehicle (NEV) and intelligent vehicles are two automotive mega-trends to underpin strong demand along China's value chain.
