There has been much discussion about China’s economic growth engine shifting from exports to consumption over the last decade, but the actual performance of consumption plays has been far from satisfactory, with the auto sector being the rare exception.
Some had done well for a brief period, but failed to sustain their strong performance.
This time, however, things could be different amid the consumption upgrade trend.
The trend, in fact, has accelerated over the last couple of years.
For example, Macau casinos used to generate most of their revenue from VIP gamblers. But the mass market now leads the growth.
Positioning itself as an entertainment and shopping hub, Macau expects its gaming revenue to rise along with the growth of disposable income in China. For March, gaming revenue in the former Portuguese enclave has beaten market expectations.
Tourism is another sector benefiting from having more affluent consumers. China’s tourism industry typically grows at double the pace of GDP growth, or about 13 percent.
Compared with the industry average, leading operators are expected to outperform with a growth clip of 25-30 percent.
Among them, online travel agencies and mid-tier hotel chains look most interesting.
China’s hotel industry had been struggling in the past due to excessive supply. But the supply is now capped by skyrocketing property prices, while demand has picked up considerably as more people are traveling more frequently.
Home-appliance makers are also an interesting sector. They are likely to gain from improving quality, mergers and acquisitions, and automated production.
The full article appeared in the Hong Kong Economic Journal on April 4
Translation by Julie Zhu
[Chinese version 中文版]
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