China: The New Breeding Grounds for Capitalism

By Profit Confidential

China’s economy is slowing, but the rich in that country continue to get richer and are growing in number. I was reading the other day that Chinese investors are now some of the biggest purchasers of high-end real estate in the United States—Manhattan, in particular. It would not be a surprise to see a buyer from China lay down $10.0 million cash for a Manhattan loft after their first visit. Trust me: the money out of China is staggering and will only grow bigger.

Yet the super-rich may surprise you. Out of the approximately 200 billionaires in China, about 83 are politicians, so you know who really runs the country and is getting rich. (Source: Anderlini, J., “Chinese parliament holds 83 billionaires,” Financial Times, March 7, 2013, last accessed June 17, 2013.) That’s unbelievable, and you know that these wealthy politicians probably can do whatever they desire, worrying very little about any conflict of interest.

China also has about 1.3 million millionaires—which trails the United States at 5.9 million and Japan at 1.5 million, according to the Boston Consulting Group. (Source: Barris, M. and Jing, S., “China to Top Japan in millionaire stakes,” China Daily, June 1, 2013.)

For Father’s Day, you can satisfy your appetite with a three-course dinner at Morton’s at The Regent Hotel in Beijing for US$135.00, or how about champagne, wine, and beer for $80.00 each at the Senses Signature restaurant at The Westin Beijing.

But while the country is seeing a renaissance in wealth creation at a pace never seen in the history of the world, the fact is that 70% of the country can still only dream of a dinner at Morton’s. It would take months for the worker in the fields to earn enough for a meal at Morton’s.

Make no mistake about it; the wealth creation out of China is unbelievable. And trust me: it’s going to continue to grow as the gap between the rich and poor broadens further.

So while the country is seeing some stalling in its gross domestic product (GDP) growth, the rich will continue to have money to spend and spoil themselves with, buying lavish goods and services, including jet-setting to Paris and Italy to buy high-end goods on weekend trips.

What this means is that there is a vast opportunity for those companies dealing in the high-end goods and services, whether they are fashion, automobile, watches, or travel companies.

The country has become a target for companies looking for big spenders who are willing to plunk down big dollars for goods, which is why we are seeing a major push of luxury goods providers into China, including Tiffany & Co. (NYSE/TIF), Coach, Inc. (NYSE/COH), Michael Kors Holdings Limited (NYSE/KORS), BMW, Rolls-Royce Holdings plc, and Rolex, to name just a few. (Read “It’s Good Times for the Rich: Luxury Spending Surging Worldwide.”)

And in China, the money does grow on trees; it’s just a matter of owning the tree.

Article by profitconfidential.com