Since the post-pandemic reopening, China’s economy has struggled to return to its growth trajectory. Still, China is the second largest global economy, accounting for 15% of global exports. With sentiment washed out and trough valuations, it’s time to consider some Chinese stocks to buy now.

In terms of sentiment, investors are extremely bearish on China, pointing to its real estate issues, slowing growth and geopolitical tensions. However, this could be a contrarian signal that it’s time to consider buying China. Warren Buffet’s maxim, “be fearful when others are greedy, and greedy when others are fearful, ” applies here.

Moreover, the bargain valuations support the bullish thesis for Chinese stocks to buy now. According to JPMorgan Chase research, the MSCI China index trades at 9.4 times forward earnings compared to a historical average of 11.6. Moreover, considering that the S&P 500 is at a forward P/E of 21, Chinese stocks are too undervalued. These Chinese stocks to buy now are high-quality businesses that offer significant upside.

Alibaba (BABA)

Although Alibaba (NYSE:BABA) is losing market share to PDD Holdings (NASDAQ:PDD) and Douyin, it remains the largest e-commerce retailer in China by a significant margin. Moreover, the fact that China is the largest e-commerce market presents a favorable tailwind.

Alibaba’s e-commerce business is still growing at a healthy rate. For the quarter that ended March 31, Taobao and Tmall revenues were $12.9 billion, representing 4% year-over-year growth. Meanwhile, its Alibaba International Digital Commerce Group segment grew 45% YOY, driven by strength at AliExpress and Trendyol’s expansion into the Gulf Region.

Its cloud intelligence segment, which provides database, elastic compute and AI products, grew by 3%. While somewhat disappointing, AI-related revenues were a huge lift as they accelerated, growing at a triple-digit pace in the quarter.

Looking forward, AI will be a massive growth tailwind for Alibaba. Already, it’s a leader, as demonstrated by the favorable ranking of its large language model, Qwen. This advanced model has attracted over 90,000 enterprise deployments.

Combining the cash flow from its e-commerce businesses and the opportunity in AI, Alibaba is among the top Chinese stocks to buy now. It trades at 10 times forward earnings and is returning value to shareholders through its $25 billion buyback.

Yum China (YUMC)

Yum China (NYSE:YUMC) is the largest restaurant chain in China based on 2023 system sales. As of March 31, it had 15,022 restaurants operating in over 2,000 Chinese cities. Its network consists of flagship brands like Pizza Hut and KFC as well as emerging ones like Taco Bell, Huang Ji Huang, Lavazza and Little Sheep.

There are several reasons why Yum China is one of the best Chinese stocks to buy. First, the valuation is very attractive compared to its historical average. As of this writing, it trades at 15 times forward non-GAAP earnings compared to the 5-year average of 34.

Secondly, the restaurant operator has a multiyear growth runway in China, which is supported by several factors. Increasing disposable incomes in China plus strong brand recognition means Yum Brand can increase locations in China substantially. For instance, KFC, which has the leading market share in China, has no presence in 1,200 Chinese cities, presenting a massive growth opportunity.

The company continues opening new stores at a rapid pace, with 378 new restaurants in Q1 2024. Management expects to open 1,500 to 1,700 net new stores in 2024 and targets 20,000 restaurants by 2026. The new openings combined with other topline drivers such as menu innovation and its 300 million loyalty program members mean YUMC stock is a buy.

Baidu (BIDU)

Often referred to as the Google of China, Baidu (NASDAQ:BIDU) is the undisputed leader in the Chinese search market, with a 53.3% market share. Although Baidu has other emerging businesses, advertising is the main source of revenue. In 2023, online marketing services, which represents revenue from Baidu Core online marketing services and iQiyi online advertising services, accounted for over 60% of revenues.

Besides search, Baidu has several emerging businesses that are new growth drivers. Its cloud services division grew revenues by 6% in 2023 to $2.6 billion. Another exciting growth engine is its artificial intelligence, particularly its ERNIE family of models.

So far, Baidu has emerged as a leader in generative AI with ERNIE and launched several lightweight large language models in Q1 2024. It’s using these capabilities to provide AI tools to support the development of customized models, AI agents and AI-native applications.

Another boost to Baidu will come from its autonomous ride-hailing service, Apollo Go. In Q1 2024, the service provided about 826,000 rides, up 25% YOY. Moreover, a reported partnership where Tesla (NASDAQ:TSLA) full-service driving would use Baidu’s navigation and mapping services is a positive. Altogether, AI cloud and intelligent driving make BIDU stock one of the top Chinese stocks to buy now.

On the date of publication, Charles Munyi had a long position in BABA but did not hold (either directly or indirectly) any positions in other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.