As China’s population prepares for the new year they will no doubt be reflecting on the change their country has undergone over recent decades. The Chinese economy has produced double-digit growth for five years* and as the economy has boomed, incomes have risen, increasing the demand for higher-value goods and services.

Chinese New Year is a time spent with family and new year’s eve is traditionally spent eating a lavish meal together. The increased demand in China and other emerging economies for Western-style food and alcoholic beverages has partly contributed to the Economist food price index rising by 75% since 2005**. It is predicted that the average Chinese consumer who ate 20kg of meat in 1985 will eat over 50kg of it this year**.

Graham French, manager of the M&G Global Basics Fund, comments :
“China’s explosive growth presents many opportunities for investors in consumer-related areas. With 44% of the population now living in urban areas*** and 12 million new jobs created in 2007****, Chinese demand for Western-style goods and services is on the rise along with people’s individual wealth.

“The country’s growing affluence is bringing a new generation of consumers, with increasing disposable income to spend on goods such as food, drinks, Western-branded clothing and beauty products. These trends bring huge investment potential in a whole range of well-managed, asset-rich companies in diverse industries.”

Graham is exploiting these themes through investments in areas such as :
• Food and ingredients (Kerry Group)
• Wine (Constellation Brands)
• Clothing and sportswear brands (VF Corp)
• Personal care products (Colgate Palmolive)

* Source: chinadaily.com, 30 January 2008
** Source: economist.com, 6 December 2007
*** Source: Population Reference Bureau, 2007 World Population Data Sheet
**** Source: dailytimes.com, 23 January 2008

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