China in Recovery Mode: 3 Stock Picks to Consider Now

Updated on

The age-old principle of “know what you own” certainly applies to the world of stocks. However, this doesn’t necessarily preclude investors in the Western hemisphere from thinking outside the box and giving international stocks a try.

Granted, it requires an extra measure of due diligence to invest in companies located abroad. China presents particular challenges as the nation’s government isn’t known for always being transparent in reporting unfavorable economic data.

Additionally, Chinese officials have described the country’s post-COVID-19 recovery as “tortuous” and “wave-like.” That’s a fair characterization as China’s on-again, off-again lockdowns and other restrictions have inhibited business activity over the past several years.

It’s a tough call for enterprising investors as China’s annualized GDP growth slowed from 6.3% in the second quarter to 4.9% in Q3. On the other hand, that third-quarter result beat the economists’ median forecast of 4.6% GDP growth.

To borrow a couple of old sayings, volatility brings opportunity, and there can be no rainbows without rainfall first. Thus, perhaps it’s time to consider a handful of outside-the-box and beyond-your-borders stock picks as China’s “tortuous” recovery could produce outstanding returns.

Alibaba (NYSE:BABA)

Not long ago, Bloomberg reported that China’s government could be preparing to ramp up stimulus to boost its economy. Of course, this would benefit a wide swath of businesses, but a fresh round of stimulus would be a particularly welcome boon to Alibaba.

The best way to describe Alibaba would be as China’s version of Amazon (NASDAQ:AMZN). Alibaba is an e-commerce behemoth in China, although it also has business interests in grocery delivery, telecommunications, cloud computing and more.

One could almost claim that Alibaba’s growth reflects China’s growth, and vice versa. It’s no secret that Chinese President Xi Jinping isn’t a fan of American-style capitalism and consumer-driven economic growth. Yet, if China’s government follows through with a giant round of stimulus, consumers are likely to “shop ’til they drop,” and that’s great news for Alibaba.

As for BABA stock, it’s nowhere near its 52-week high of $121.30, and Alibaba’s trailing 12-month price-to-earnings (P/E) ratio of 18.69 suggests there may be a bargain afoot. Furthermore, Alibaba has an earnings report due in November, so it will have an opportunity to demonstrate its resilience despite China’s challenging economic conditions.


In case you didn’t get the memo, a workers’ strike has slowed the production schedules of several major U.S. automakers. It’s a tough time to be invested in American car manufacturers now, but we can look to China for brighter prospects in the automotive sector.

If you’d like to add some electric vehicle (EV) exposure to your portfolio, it’s a great time to look at China-based automaker Nio. This is one of China’s best-known EV manufacturers, and NIO stock trades in the U.S. directly on the New York Stock Exchange.

Furthermore, Nio is thriving even while other global automakers are struggling. Tesla’s (NASDAQ:TSLA) September-quarter EV delivery figures may have disappointed many investors, but Nio rose to the occasion with 55,432 vehicle deliveries for the quarter, up 75.4% year over year.

Meanwhile, NIO stock would have to nearly double to revisit its 52-week high of $16.18. In other words, Nio’s shares are down, but the company’s EV deliveries are up, indicating a mismatch that could resolve with a sizable stock-price rally.


If Alibaba is China’s Amazon, then Baidu could be compared to Alphabet’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google. Baidu provides a popular search engine in China, and like Alphabet, it has also delved into cloud services and other tech-infused fields.

Like the U.S. autumn holiday season, China has its Singles’ Day shopping festival this month. Alibaba created this bargain-shopping event, but Baidu’s business should also benefit from Singles’ Day. After all, just like in America, consumers in China will use search engines to browse and comparison-shop before making purchases.

Moreover, just like Alphabet, Baidu is deeply immersed in the global artificial intelligence (AI) arms race. Indeed, Baidu recently claimed that its generative AI chatbot known as Ernie is just as powerful as OpenAI’s GPT-4 chatbot.

That’s a bold claim, but it certainly sounds like Baidu is unafraid to compete with gen-AI’s major players in 2023. Thus, this may be the right time to pick up a few shares of BIDU stock as it’s about as cheap as it’s been this year.