China’s economic recovery may be uneven, but we would argue that investors should bring their attention back to the country’s long-term growth drivers. Here are four engines of growth that will propel the Chinese economy in the years ahead.
Wenchang Ma, 4Factor Portfolio Manager, Ninety One
The reopening of China sparked a wave of positive market sentiment as investors anticipated a robust economic recovery. But over the last few months, we’ve seen optimism waxing and waning due to a fixation on short-term demand and growth dynamics. China’s recovery may be uneven, but we would argue that investors should bring their attention back to the country’s long-term growth drivers.
Consumption market expected to almost double by 2030
The first important growth driver is China’s expanding consumption market. There are already 140 million Chinese households that have an annual disposable income exceeding US$25 000, and this middle-class cohort is expected to grow to 380 million households by 2035. That translates to almost one billion people who will be seeking better quality products and services and a wider array of lifestyle experiences. As a result, China’s total consumption market, which is sitting just under US$10 trillion today, is expected to nearly double by 2030 to reach close to US$19 trillion. That is basically the size of the US consumption market today. So in the race to tap into this opportunity, leading domestic companies are increasingly gaining market share in a variety of consumption industries, which include beer, dairy products, textiles, sportswear and home appliances.
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