Why we should be thanking China for slowing down

clock • 2 min read

The recent perils of not understanding the Chinese stock market have taken centre stage, and meaningful economic data points have been ignored, says LGBR Capital's Fen Sung.

Images of farmers and housewives losing all their savings appearing on the internet, led to inaccurate fears of the dying Chinese consumer.

In actual fact, less than 15% of the average household's financial assets are invested in the stock market, which helps explain why the recent roller coaster market has not had a dramatic effect on China's consumption figures.

Currently at around 200 million, and predicted to swell to over 600 million in just ten years' time, China's middle class will propel the most populous nation to become the next consumption powerhouse. China's future middle class will likely be larger than the combined populations of the US and Japan.

Why do we ignore China's consumption growth? Perhaps the perils of Glencore have not shown China in a favourable light, but surely the writing was on the wall.

Less growth and more opportunity but no hard landing for China yet

China is already a $10trn economy and if it continued to race away at double digits growth rates, where do you think global inflation and interest rates would be now? We should be thanking China for slowing down.  

Returning to consumption - why are we not talking about China's 39% increase in online sales in the first half of this year?

China has already become the world's largest e-commerce market. With the affordability of smartphones in China, the number of internet users utilising this medium has now exceeded accessing the internet via PC; a major change in consumption pattern.

Tangential plays on this theme can often be where more interesting opportunities can be found. Trying to guestimate who will win the next smartphone war in China can be painful: remember HTC? Technology infrastructure, online payment, advertising, or even internet security can all play on this theme.

Finally, it is not just consumption within China. Currently only around 5% of Chinese people hold a passport, imagine the number of passport holders in ten years' time. Why do you think Fosun bought a stake in Thomas Cook?

Fen Sung is a China product specialist at LGBR Capital

Bull Points

• Growing middle class 

• Increased social spending

Bear Points

• Pollution impact on economy

• Slow state-owned enterprise (SOE) reform

0911-china-table

More on Asia

Aviva Investors' Wakefield: Is Japan's stock-market sugar rush sustainable?

Aviva Investors' Wakefield: Is Japan's stock-market sugar rush sustainable?

New regulations to 'improve competitiveness'

Baylee Wakefield
clock 14 March 2024 • 4 min read
 abrdn's Yeo and Kwik: Will the dragon soar in 2024 for China?

abrdn's Yeo and Kwik: Will the dragon soar in 2024 for China?

'Cause to be optimistic'

Elizabeth Kwik and Nicholas Yeo
clock 09 February 2024 • 4 min read
What happened to China in 2023?

What happened to China in 2023?

Nine experts debate

Investment Week
clock 16 January 2024 • 5 min read
Trustpilot