China’s consumer market is a limited one, mainly because it is contained within the country’s borders. However, DBS Group Research believes that this is a “beauty of both sides.” They also add that consumer companies provide “better resilience during the harsh times as well as fruitful returns whenever skies clear again.”
“More practically,” writes Adam Roseman in an ARC China newsletter, “the Chinese government favors rebalancing economic growth toward consumption. To that end, it is pursuing policies that increase the minimum wage, limit individual medical costs, accelerate urbanization with new transportation systems, and build millions of units of affordable housing.
“The big trend lies in the discretionaries,” he continued. “DBS Group sees the yuan continuing to appreciate, increasing the purchasing power of mainland consumers. High-end merchandise retailers will continue to spread into China’s provincial cities, and sustainable inflation will prompt demand for valuable assets, including gold and luxury watches.”