China marks traditional festival in time of fast-paced growth

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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