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Investing in China – The key themes(PART2)
  • City living

    Meanwhile, China is also seeing a migration of its population from rural areas to cities, with some 160 cities in China now boasting a population of one million or more and six of them larger in size than London. By the end of 2018, 59.58% of the total population of China lived in urban areas, up from just 17.92% in 1978. China aims to increase this to 70% by 2030.

    This urbanisation is another key theme. The trust plays it through a number of stocks, including eco-friendly paint manufacturer Skshu Paint, which benefits as more Chinese citizens move into their own homes.

    Despite the rapid growth of city living in China, per capita paint consumption remains well below that of the US. In fact, per capita demand across the whole of Asia was just 32% that of the US in 2018. With the population of China being more than quadruple that of the US, this leaves a lot of room for growth. According to KPMG, Asia is the fastest growing market for paint geographically.

    The rise in disposable income is also driving demand for luxury items, such as jewellery. Lukfook Holdings, a prominent jewellery retailer in China, Hong Kong and Macau, is a holding in the trust that plays on this theme. Having opened its first store in 1991, it had more than 1,640 shops across the globe by 2018.


    Meanwhile, the government’s push to rebalance the economy from fixed asset investment and exports in favour of domestic consumption is also benefitting such areas as healthcare and
    pensions. At the same time, China is beginning to catch up with developed countries in terms of the age of its population. While today 125 million people across the world are aged 80 years or older, the World Health Organisation (WHO) predicts there will be almost this many living in China alone by 2050.

    All this is driving increased demand for healthcare, and China does not stand still in terms of innovation in this area. China’s pharmaceutical industry is already the second largest globally and growth is expected to continue as part of the Healthy China 2030 initiative.

    The trust plays this theme through a raft of holdings, including top-ten stock Hutchison China MediTech. The firm is a leader in the biopharma industry, specialising in therapies for oncology and immunological diseases. It has a number of potential drugs in its development pipeline, with multinationals such as AstraZeneca and Eli Lily teaming up with it on development and sales of some of the key drugs in the pipeline. It also boasts a strong traditional Chinese medicine business that acts as a stable cash generator.

    These key themes – healthcare innovation, consumption growth and technological advances – permeate the portfolio and are set to continue underpinning China’s transition to a stable developed economy for years to come.

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