The fastest growing sector of the Chinese economy is racking up spectacular gains right where I said it would. On the Internet.
The rate of growth in this sector is unbelievable. (Even by Chinese standards.)
In the first half of the year e-commerce sales in China more than doubled! Revenues topped 211 billion yuan ($31 billion) in the first half of 2010. For the whole year, sales are expected to rocket to $64.5 billion.
Sales at China's e-shops more than tripled between 2007 and 2009! That is much faster than the average 18 percent yearly growth of all retail sales, an impressive that China has routinely chalked up in recent years.
The latest figures come from a report on China's Internet market released by Alibaba, the nation's largest Nasdaq-listed e-commerce company.
Alibaba is a thinly traded pink sheet on the Nasdaq (OTC:ALBCF). It is a much, much more liquid stock on the Hong Kong Exchange which is easily accessed from most brokerage accounts. The company can be tracked as HKG: 1688 on Google Finance and on other websites.
Can We Believe These Numbers?
We predicted a coming explosion of online shopping just a month ago. Now the proof is coming in. And not just from companies with skin in the game.
Nielsen Online says consumers from China are the most prolific online shoppers in the whole Asia Pacific region. Nearly 95 percent of Chinese shoppers are planning a web purchase in the next six months.
The potential for growth is still huge. The number of Internet users in China climbed to 420 million this year. (That is already 36 million more than at the end of 2009.)
But China's Internet penetration rate still lags far behind many other countries. Total penetration only reached 31.8 percent of its potential in China by June of this year. China's Internet presence is set to grow by hundreds of millions of users.
And, once Chinese shoppers do go online they shop more than anyone else.
The new Nielsen report shows how online spending as a percentage of total monthly spending varies by country. Chinese and South Korean online consumers make the most purchases through the web.
Chinese consumers are very price sensitive but also insist on quality and prefer brand names. On average they spend 6 to 25 percent of their average monthly outlays through the web.
Here's what they're buying:
Follow the Future Money
Future trends indicate China's online shopping binge will surge in coming years.
It will also explode onto the international scene.
Deutsche Bank has just come out with an eye-popping prediction about the Chinese online market. Web sales are expected to reach 1.5 trillion yuan ($220 billion) by 2014.
E-commerce is one of the most exciting fields in the country, Deutsche Bank enthuses. Online commerce will continue to boom among existing users. And the number of Chinese people online will mushroom to 812 million by 2014!
Companies benefiting from this trend will include Taobao.com which is a hybrid of eBay and Amazon. Taobao.com is not available to western investors.
Alibaba.com is a globally traded stock. But so far Alibaba shares have not performed as well as revenues.
Alibaba.com reported a 46% jump in second-quarter profits in August. But shares continued their year-long decline. Year to date, Alibaba.com shares have lost almost 17 percent. Shares still sport a P/E multiple above 55.
As I'll describe in future postings, Alibaba.com has major ambitions outside of China. And global growth may propel this Chinese company into the revenue stratosphere.
For more information and archived issues, visit http://www.globalprofitsalert.com
Global Profits Alert (GPA) is published by Trippon Financial Research, Inc. a financial media organization with offices in the United States, Hong Kong and Mainland China. GPA is written by Jim Trippon in conjunction with George Wolff, Sunny Wang, Todd Shriber, Kelley Damiani and J. Daryl Thompson.
Would you like to republish this article? Global Profits Alert issues can be republished, as long as the republished issues contain the name of the author(s) and the following short paragraph:
This information was brought to you by GlobalProfitsAlert.com, a publication of Trippon Financial Research, Inc. GlobalProfitsAlert.com publishes information on Investing in the China stock market and emerging markets, dividend stock and income investing, exchange traded funds (ETFs), green energy stocks, technology stocks, global market trends and other investment information. To view archives or subscribe, visit http://www.globalprofitsalert.com.
Disclosure: No positions