Are Chinese Stocks Safe to Buy? Which Ones are Best?

Things might be starting to turn around for Chinese stocks. To start, the full-scale COVID-19 lockdowns in Shanghai and Beijing are finally being lifted. At the same time, regulatory tightening in the tech sector is also on the decline. With both of these events in mind, investors are starting to re-examine Chinese stocks.

If you are new to overseas investing, we will take a quick look at how it works and whether or not it’s safe. If investing in foreign companies is nothing new to you then feel free to skip ahead to read about my three favorite Chinese stocks.

Are Chinese Stocks Safe?

When it comes to investing, hardly anything is 100% safe. There are plenty of examples of corporate misconduct in practically every country. In the U.S., Enron is the classic example. More recently, you could also include WeWork. Both of these companies mislead investors, reached sky-high valuations, and came crashing back down.

With this in mind, it’s not quite fair to declare all Chinese stocks as “unsafe.” But, it’s also worth noting that Chinese companies play by a different set of rules.

To start, Chinese companies work basically hand-in-hand with the Chinese government. Pretty much all major Chinese companies will have a government official on the Board of Directors. This way, the government can closely regulate and influence the company’s actions. These officials mainly want to make sure that companies are operating in the best interest of the Party. The government also has very strict rules that all companies must follow. This is why it’s notoriously difficult for U.S. companies to operate in China.

On top of that, Chinese companies sometimes even use a different accounting system. This can make it more difficult for investor to interpret financial results.

Again, these factors don’t mean that buying Chinese stocks is a bad idea. These are all just things to keep in mind as potential risk factors. With that said, let’s examine three Chinese stocks that are separating themselves from the pack.

No. 3 Nio (NYSE: NIO)

The biggest complaints about electric vehicles are usually related to charging them. After all, not every household is designed to fit a charging station. You might live in a house that has no garage or a high-rise with no parking at all. Even once you find a station, charging your EV can take several hours depending on a few factors. This can be quite an inconvenience if you are on a long journey. Nio is an electric car manufacturer that’s working to make charging easier for electric vehicle owners.

What sets Nio apart from other electric car companies is that it offers four different ways to charge.

1. Traditional charging stations: EV owners can pull up, plug-in, and charge.
2. Power Swap: A patented technology where Nio swaps an exhausted battery for a fully-charged one.
3. Power Mobile charging: A roaming van that carriers a charging station. Through Nio’s app, you can flag down the van to come and charge your car.
4. 24/7 charging valet: A Nio employee collects your car for you, charges it at a station, and returns it.

It’s reassuring to see Nio actively trying to solve one of the EV industry’s biggest problems. If it is successful, it’s easy to see Nio becoming one of the more popular Chinese stocks. This is especially true once you consider that Shanghai is no longer under a COVID-19 lockdown.