{"id":3844,"date":"2021-09-06T12:00:00","date_gmt":"2021-09-06T04:00:00","guid":{"rendered":"https:\/\/www.syfe.com\/magazine\/?p=3844"},"modified":"2024-04-02T14:00:13","modified_gmt":"2024-04-02T06:00:13","slug":"capitalising-on-chinas-growth-with-rising-middle-class","status":"publish","type":"post","link":"https:\/\/www.syfe.com\/magazine\/capitalising-on-chinas-growth-with-rising-middle-class\/","title":{"rendered":"China\u2019s New Economy: Riding The Next Wave Of Chinese Growth"},"content":{"rendered":"\n
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In just 40 years, China has accomplished a remarkable feat in transforming itself from a third world country to the world\u2019s second largest economy.<\/p>\n\n\n\n

Now, the next chapter in China\u2019s growth story is being written as its economy matures and transitions from manufacturing and export-led industries to a consumption- and services-driven new economy. This shift means that new economy sectors like Consumer Discretionary, Communication Services, and Information Technology are leading the next stage of China\u2019s growth. <\/p>\n\n\n\n

Key drivers include booming consumerism, rapid urbanisation and new technology adoption, all shaped and supported by national strategic policies. For instance, China\u2019s 14th Five-Year Plan for 2021 to 2025 emphasises technological innovation and domestic consumption, both of which are aimed at supporting more sustainable, long-term growth in China. <\/p>\n\n\n\n

China\u2019s consumer-driven economy<\/strong><\/h2>\n\n\n\n

In 2020, consumption accounted for 54.3% of China\u2019s GDP, a modest dip from the 57.8% reported for 2019. This was in part due to China\u2019s success in containing COVID-19, and the country\u2019s subsequent economic recovery. <\/p>\n\n\n\n

Compared to most developed countries (World Bank data puts consumption at an average 73% of GDP for OECD countries), China\u2019s consumption can be considered relatively low, with much room for growth. <\/p>\n\n\n\n

The country\u2019s transformation to a consumer-led economy is already underway and rapidly advancing. For the first half of 2021, China\u2019s total retail sales were 9% higher than the same period in 2019, underscoring a resilient post-pandemic rebound. <\/p>\n\n\n\n

Strong consumer spending has been undoubtedly powered by income growth. Over the 10 years through 2019, inflation-adjusted income rose at an average annual pace of 7.9% in China, compared to 1.9% in the US.<\/p>\n\n\n\n

Chinese consumers have also been enthusiastic new adopters of technology, which explains the rapid growth of mobile payments and e-commerce in China. As of June 2020, there were 940 million internet users in China, of whom 749 million shopped online.<\/p>\n\n\n\n

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Source: MSCI <\/figcaption><\/figure>\n\n\n\n

China has nearly 850 million smartphone users, compared to just 250 million in the US. China\u2019s mobile payment usage penetration is also more than double that of the US. <\/p>\n\n\n\n

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Source: MSCI<\/figcaption><\/figure>\n\n\n\n
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Source: MSCI<\/figcaption><\/figure>\n\n\n\n

Given these factors, Chinese consumption could hit \u201cone of the highest levels in the world\u201d over the next decade. This is a prediction by Morgan Stanley analysts, who forecasted that China\u2019s private consumption could more than double to reach $12.7 trillion by 2030.<\/p>\n\n\n\n

As China redefines its role in the world, long-term investors ignore China\u2019s growth at their peril. As such, we created the Syfe Select China Growth thematic portfolio<\/a> as a way for investors to benefit from China’s rise.<\/p>\n\n\n\n

Key themes within the portfolio<\/strong><\/h2>\n\n\n\n

The Syfe Select China Growth portfolio targets the following new economy sectors that are rapidly reshaping China\u2019s economy. Our investment team is constantly monitoring new sectors for possible inclusion. <\/p>\n\n\n\n