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  • China Spending Power Opens Broader Windows For Investments 0 comments
    Jul 12, 2013 7:22 AM

    The change and upgradation of the lifestyles of the middle class has lead to an increase in the domestic spending. This relationship is phenomenal and results in an increase in the investments of the China Consumer Industry Stocks.

    This incredible trend is the result of the westernisation of the culture and subsequently has lead to the branding trend and big budget spending of the middle class. Seeing China's increasing population there is an anticipated increase in the population of the middle class by seventy percent by the end of the year 2020. The average disposable income of the urban Chinese households has risen tenfold as compared to 1980. Though there isn't any official concept for the Middle class in China, but the households that do fall in this category would be earning an average of anything between ten thousand dollars to sixty thousand dollars a year. Interestingly China has superseded Japan in consumer expenses relating to the consumption of luxurious goods. It now stands second in this category after the U.S. The average middle household wife does not hesitate to buy foreign brands and luxurious brands. It is anticipated that the per- capita disposable income of the Urban Sector Consumers would double by the year 2020. This increase in the spending power opens up bigger opportunities for investing in China Consumer Sector. Many FMCG Companies see an official increase in the consumption of their products in China according to the analysts at Bain & Company. But one point to keep in mind over here is that the Chinese consumers are extremely price sensitive and brand conscious. Of lately there has been a developers Slump in the Shanghai Index by 0.5 %. Due to the Governments New Property Curbs China's Home sales value has fallen by 13 % in the last months. Though there has been an increase in the exports. There has also been an increase in China's Industrial Output and Retail sales as per the National Bureau of Statistics. The anti corruption of China and the structural problem in its economy have been the resultants of the decline in the valuation of the stocks as stated by Gold Sachs.

    According to the Five Year Plan (2011-2015) released by the Chinese Government there is a major shift in the economical approach. It caters to a slower growth and an increased rate of domestic consumption. There is an initialisation drive to increase in the urbanisation with a consequential annual increase in the minimum wages of nearly thirteen percent. This growth in the disposable income will lead to an increase in the consumption of consumer goods in the domestic market and as a result lead to potential profits for the China Consumer ETF. This Financial vehicle allows the investor to take full advantage of the growth of the China Consumer Sector. This ETF is quite dependable for the investors as it purely relies on the domestic economy and does not rely on the foreign thrift which would be a cause of concern and cater to a larger risk.

    Out of the Top Ten Largest Economies of the World, China is ranked second in GDP. The year 2014 sees the percentage growth of GDP of China at 8.2% which would be standing third after Libya and Iraq. The figures of 2009 show China & Japan at the same rank in terms of the GDP.

    Mercedes -Benz car sales have risen by 16% in November of which the total number of cars sold in China alone are nearly 8,700, triple the amount sold in the year 2008. Similarly Audi Ag has announced a double sale in China. This upward trend in the spending power of Luxurious commodities shows a hopeful and positive potential in the global x china consumer ETF's.

    Global X China Consumer ETF [CHIQ] delivers as per the performance of the benchmark after annual expenses to the tune of 0.65%. This investment in the China Consumer Sector covers sectors such as the Retail, Automobile, food, consumer services Healthcare etc. Of these the first three alone hold 49.1% of the share of this Industry's Cake. CHIQ ETF introduced on 30/11/2009, has a total asset of 200.47 million as on 11/7/13.

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