China is often seen as a source of low-cost manufacturing. Yet today, many Chinese companies are building world-class brands that are overtaking global competitors at home—and are not fully understood by investors.

Brands are the lifeblood of business resilience. Companies with dominant brands enjoy huge competitive advantages and pricing power. However, investors discovering China today often focus on short-term financial results and underestimate the intangible value of brands. This is a big oversight, as Chinese consumers increasingly shun Western brands in favor of homegrown alternatives.

Chinese Brands Rise in Global Rankings

Investors don’t usually incorporate brand analysis into their financial forecasts. But in China, the rapid rise in the value of local brands is a key ingredient in the long-term growth potential of companies. In fact, 15 Chinese companies now rank among the top 100 global brands, according to a recent report by advertising group WPP. Two Chinese brands—Alibaba Group and Tencent—are in the top 10. And internet giant Tencent’s brand was valued at more than the combined brand value of Coca-Cola, Disney and Starbucks, three American brand icons.

The total value of Chinese brands in the top 100 has grown by 14 times since the first Chinese brand entered the list 12 years ago, outpacing developed-market brands by a wide margin (Display). And today, Chinese brands account for 14% of the value of the top 100 global brands.