As much as U.S. stocks have climbed this year, Chinese stocks have surged as more investors are drawn to the world’s second-largest economy. While China has been dogged by growth concerns in recent months, many U.S.-listed Chinese firms aren’t suffering from a lack of growth with many posting blockbuster earnings and sales.
Jupai is a wealth management company, and Hailiang is the third-largest K-12 education company in China. The two show how the market has seen Chinese stocks more favorably this year across a range of sectors, with China’s tech and consumer staples sectors performing especially well.
One reason sectors and individual Chinese stocks are doing so well is the country’s booming middle class. A recent report from the National University of Singapore predicts the Asian middle class population will reach 1.75 billion in 2020, from 500 million in 2010, and said that “Asia is going to add 1.5 times the total population of the West to the global middle class population in one decade.”
54% of China’s middle class in particular is expected to be classified as “upper middle” class by 2022, according to McKinsey, thanks to a growing number of higher paying tech jobs and service industry jobs.
Meanwhile, Chinese consumption—or the amount of stuff people buy—is expected to grow by 9% per year through 2020, and overall, the consumer economy is forecasted to grow by 55% to US $6.5 trillion. That’s an increase of $2.3 trillion, and is like adding a new consumer market 13 times larger than the consumer markets of Germany or the U.K. today. And that’s all assuming that China’s GDP only grows by 5.5% per year, which is lower than the projected growth of up to 7% per year.
It’s no wonder then, considering the rise of China’s growing consumption-oriented middle class, that investors are hungry for Chinese stocks.