China is modernising and nation-building
Domestic Consumption
China’s economy today is driven by domestic consumption. China is the world’s largest market for online retail and now represents more than 30% of the global market in luxury goods, automotive, consumer appliances, mobile phones, and spirits. In 2021, local consumption contributed over 90% of GDP growth. Chinese consumer discretionary spending has doubled since 2010 and is set to double again in the next 10 years to reach US$12.7 trillion, approximately the same as American consumers spend today. In addition, with household savings rates increasing during the Covid pandemic, there is increasing pent-up domestic demand which is likely to have an impact in 2022. Retail sales are already predicted to grow by at least 6% this year.
Innovation and R&D
China invests more money in innovation (USD60 billion) than any other country in the world and is already becoming a global leader in high value manufacturing, healthcare, environmental protection, e-commerce and advanced technology (e.g. AI, robotics, biotech etc.). China’s spending on R&D increased 10.3% in 2020 to USD378 billion, accounting for 2.4% of GDP, and is set to increase by more than 7% per year between now and 2025. Urbanisation and Infrastructure Privatisation and Entrepreneurship China is ‘modernising’. It's not ‘westernising’. Investors must take a fresh, proactive and open-minded approach to investing in China, and resist the temptation to make decisions based on knowledge and experience gained in more developed markets. |
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