Partner Insight - Can investors keep pace with the Chinese consumer?

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Partner Insight - Can investors keep pace with the Chinese consumer?

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".

City lights

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".

Important Information
This information is for investment professionals only and should not be relied upon by private investors. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. Fidelity's range of Asian equity funds have the potential of having high volatility either from their composition or the techniques used to manage them. The funds can use financial derivatives which may expose them to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Investments in small and emerging markets can be more volatile than other more developed markets. Changes in currency exchange rates may affect the value of investments in overseas markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Investments in Fidelity funds should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document, current annual and semi-annual reports free of charge on request by calling 0800 368 1732. Issued by FIL Pensions Management, authorised and regulated by the Financial Conduct Authority and Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0419/23974/SSO/NA

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