China Week: What Does The Growing Middle Class In China Mean For Companies And Their Stocks?
Continuing our week-long focus on China, today we will take a look at the growing middle class in China. This huge mass of people that are entering a new level of prosperity has the eyes of companies all over the world. What companies are poised to benefit from this new enormous group of consumers? How can investors target these companies and earn a higher than average return by investing in them? Let’s take a look.
As we have discussed, China is in a period of fantastic economic growth. A very real by product of this growth is that more people are making more money than every before in this country. With a country and population of this size, this is a very large factor in the world economy. The Chinese market is the top focus of countless companies all over the world.
First up… commodities. The growth of the Chinese middle class means that more people have a higher quality of life. Typically, this higher quality of life results in more expensive diets. For example, more Chinese are eating more than just rice these days. Americans and other developed countries have enjoyed a diet full of quality beef and other high quality foods and now the Chinese are desiring these things as well. This results in worldwide increase in demand for food.
An additional interesting side note of more beef consumption is a water shortage. It takes much more water to produce beef than to produce agriculture such as rice.
Turning towards energy, as more Chinese increase their lifestyles, expect more Chinese to begin to own cars. Hundreds of millions of Chinese jumping into the automobile market adds a huge amount of demand for energy. Such Fundamentals are very bullish for oil prices.
As the Chinese grow their middle class, millions will begin to travel. A huge portion of the Chinese population has never left China. Chinese tourism is poised to break out big time. A great company that is poised to benefit this the most is Ctrip.com (CTRP). Ctrip.com is basically the Expedia of China. This is a great growth stock that I have talked about before and recently had a huge pop after solid earnings.
This giant new group of consumers has companies salivating over the potential growth in China. One of the consumer electronic companies that I am most interested in when it comes to the Chinese consumer is Apple (AAPL). The Apple iPhone has already proved to be popular in China, yet the iPhone is not even officially on sale yet! Apple has recently opened the doors for its retail presence in China and I look for more stores to open all over China. The future of computing and gadgetry is both convergence and mobility. China is embracing this future, and the iPhone is the leader of this trend. As an Apple investor, I am pumped about what China means for this company (and others).