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Economic Update

Consumer spend spearheads China prospects

The diminishing role of investment in China’s gross domestic product and the increasing part consumer spending is playing in the country’s economy are creating investment opportunities in new sectors.

Capital Group investment specialist Andy Budden said many Chinese who previously struggled to afford housing were now finding they had excess cash to spend on discretionary items. It is in these areas where investment opportunities lie.

“The discretionary spend is usually related to leisure, so TV [manufacturers] and holiday [facilitators],” Budden said.

He nominated insurance as another sector where interest had climbed sharply, but “the big one we look at there is healthcare”. “Healthcare in China operates at a fairly low level, doesn’t have that much penetration, but demand is absolutely skyrocketing,” he said.

“And there are a number of international companies that have been able to take advantage of this.”

China was now aiming for local organisations to provide the required healthcare services, so that narrowed how investors could best take advantage, he said. “We’re spending a whole bunch of time looking at healthcare and trying to understand in a very fragmented space as to which companies have the best propositions and which ones are ultimately going to emerge as the winners and the national champions,” he said.

“So I’d look across that very, very broad spectrum of opportunities.”

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