Hyomi Jie, Portfolio Manager, Fidelity China Consumer Fund, tells Incisive Works how the Chinese consumer is changing
The story of the Chinese consumer is one of the most exciting in the world, and it has decades still to run, powered by the twin themes of urbanisation and the rising middle class.
Hyomi Jie, Portfolio Manager of Fidelity's £142m Fidelity China Consumer Fund, taps into these trends through stockpicking in the consumer goods, consumer services and technology sectors, with a growth and quality bias. "My universe is really about what Chinese consumers buy and how they buy," the manager says.
What Chinese consumers buy is changing rapidly as they become more affluent and aspirational. In 2015, just 10% of China's total population had an annual disposable income per capita above $10,000 and this is expected to grow 3.5 times over the next 15 years. "That's a massive opportunity," says Jie. "We know that, when people become wealthier, the things they want to own, eat and experience changes a lot. I don't think it's a three or five year story but a decades-long story.
But it's not just about what people are consuming and the way people consume is rapidly developing. "The relationship between the consumer and technology has progressed at an incredible rate. The innovation of mobile technology, interaction with consumers and mobile payments already surpasses the West, and we can expect even more as the 5G network rolls out next year".
China has been urbanising slowly and steadily over the years, from 35% urbanisation 20 years ago to 60% today and more than 80% expected in the next 20 years, which would put it on par with the US and UK. "When people move to towns and cities their consumption habits change. Eating out, going to the cinema, visiting the shopping mall become the norm and this also leads to ‘premiumisation' as people become more brand aware". Government policies are making it easier for people to move to cities, while there is the allure of jobs and access to education.
Hyomi suggests that consumption behaviour in China's Tier 1 cities like Shenzhen and Shanghai is more closely aligned to global international cities like London and New York. With the influence of social media those living in lower tier Chinese cities are becoming increasingly aspirational, further changing consumer tastes. "Urbanisation and social media is leading to a cascade effect of consumption behaviour and this has a large potential benefit for consumer-related companies".