By MoneyMorning.com.au
Ed Note: David Thomas, BRIC expert and entrepreneur, gave a great presentation at ‘After America’, Port Phillip Publishing’s first investing conference. Today he shares some ideas on China…and where to look for investment opportunities. You can pre-order the After America DVD now to learn more, plus his thoughts on India, Brazil and Russia.
China has three imperatives, as comprehensively described in their 12th Five Year Plan (2011 – 2015):
Driving investment offshore, in real corporate assets to diversify their exposure to US Treasuries, to secure resources and commodities. Also to upgrade their service sector (tourism, education, healthcare, technology, financial services etc.). This creates new opportunities for foreign companies to participate in China’s industrial revolution and nation-building activities.
Investing in the development of their 2nd and 3rd tier cities in their inner and western provinces, increasing productivity and consumption, creating jobs and continuing the process of rapid urbanisation, whilst focusing on the progressive industries of the 21st century (IT, biotech, high value manufacturing) and a cleaner, sustainable environment for their increasingly urban population.
Accelerating the development of clean technology with a commitment to spend US$65 billion each year (investment in renewable energy spending has grown at 77% p.a. since 2008) in the development of new renewable energy sources (hydro, nuclear, solar, wind, biomass and more efficient use of coal and existing energy sources). And clean energy vehicles to reduce their dependence on fossil fuels and improve the environment by a 40% to 45% reduction in carbon intensity from 2005 levels by 2015
But the key to the future growth of their economy depends on an increase in domestic consumption. Leading companies, entrepreneurs and business leaders are competing for access to their rapidly growing market. Opportunities exist across the board, but one example of this is in the area of fresh and organic food.
China’s domestic food market is already very strong and vibrant and, with its rapidly growing middle class and urbanisation program, is in a state of transition. For centuries, the Chinese have purchased their daily fruit, vegetables, meat and other perishables from local fresh produce markets.
More recently, with increasing urbanisation, modern supermarkets are gaining popularity and the trend to purchase weekly is slowly becoming more convenient for busy commuters. In the past, little attention was paid to the origin or treatment of the food, as “fresh” was simply considered the best option.
Whilst fresh is still a major consideration, Chinese shoppers are now focused on food safety, health and diet. The spate of food quality incidents and a heightened awareness of the effects of pesticides have produced a more discerning consumer and fresh and organic options have gained popularity.
Soil depletion, over-cultivated land, pollution and public health issues have also forced the Government to look for solutions. They see organic farming as a potential remedy and for the past 30 years have been working on initiatives to develop a national standardisation body.
When it comes to fresh and organic food products, price sensitive Chinese consumers still pay close attention to whether produce is grown locally or internationally. With time, and as China continues to develop their local food industry, more local options and choice will become available to local consumers. In the meantime, foreign players are beating a path to China’s door.
David Thomas
Contributing Writer, Money Morning