23 July 2019
Demand for drugs will increase as Chinese people are more health-conscious. Photo: China Daily
Demand for drugs will increase as Chinese people are more health-conscious. Photo: China Daily

China consumption story: Food and drug sectors to excel

Alibaba founder Jack Ma said recently that China will disrupt the global economy in the next 30 years. investors who miss the China market would miss the future.

China will have a middle class of 500 million to 600 million people in the next 10 to 15 years. This group of customers has massive demand for quality products and services, Ma said.

The US middle class changed the world economy in the past 30 years. For the next 30 years, China and other emerging economies are going to play that role, Ma said.

Equally bullish on China, the Boston Consulting Group expects a quarter of the growth of the global consumer market to come from China in the next five years.

Indeed, Chinese consumers are more wary of product quality with rising disposable income in recent years. High-quality imported goods have become sought-after. Consumption upgrade is set to become a major theme. Lower-tier cities may become the main driving force of the nation’s economic growth.

China’s retail sales of consumer goods hit 2.95 trillion yuan last month, up 10.7 percent from the previous year. Consumption was relatively stronger in rural areas, with retail sales expanding 12.7 percent in May, while retail sales in urban areas climbed 10.4 percent year on year.

Online sales expanded 32.5 percent year on year in the first five months.

The robust consumption growth is tempting. Which market segment is the most attractive?

Currently, five categories of products recorded the strongest growth pace, including grain, oil and food, beverage, pharmaceuticals, home appliances and audio and video equipment, and furniture have posted average growth of over 13 percent in the same period.

There is an old Chinese saying “food is the basic need of man”. Consumers now want better and healthier food.

At the same time, demand for drugs will also increase as people are more health-conscious.

I would suggest investors start with the food and pharmaceutical sector if they want to ride China’s consumption boom.

This article appeared in the Hong Kong Economic Journal on June 30

Translation by Julie Zhu

[Chinese version 中文版]

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