“CHINA IS SHIFTING from exporting to importing,” Jack Ma, the CEO of Chinese
ecommerce giant Alibaba told an audience of 3,000 small business owners in June. “China
is going to be the world’s largest consumption place, and that engine is going to drive the
Ma implored the audience to not just think about importing from China, but exporting
to it as well. So great was the emerging potential purchasing power that Ma pledged to newly
elected President Trump in January that Alibaba would create 1 million US jobs by allowing
small and medium-size businesses to sell to China through the company’s platforms.
Ma is right to point out the watershed moment, and savvy investors are also positioning
themselves to take advantage of China’s booming consumer class. Fueled by rising wages,
new attitudes, and government policy to diversify away from China’s investment and export
growth model, consumer spending has been surging. The Boston Consulting Group projects consumption to grow 9% annually through 2020, and notes that per-capita income
in China has been increasing at an 11% annual pace since 2010. The rebalancing of the
Chinese economy continued in the first half of 2017, with consumption accounting for 63.4%
of GDP growth compared to 44.7% contribution during the same period in 2010, according
to Matthews Asia.
The challenge for investors: identifying how best to tap into the trends stemming from
the upwardly mobile Chinese consumer, while avoiding the myriad of risks that come from
investing in the country. They include often poor corporate governance and volatility driven by
hot capital flows. Then there is the geopolitical dimension, as Beijing juggles border disputes with
India, an increasingly chaotic North Korean regime, and a contentious Trump administration.
even as risks
can profit while
Reported by Vishesh Kumar
Art by Brian Stauffer