The Chinese government has been enacting reforms to shift away from an export model to domestic growth. Investors can capitalize on change through more consumer-oriented China exchange traded funds.
For instance, the Global X China Consumer ETF (NYSEArca: CHIQ) is the only ETF to focus on China’s consumer sectors. CHIQ has a 58.9% tilt toward consumer discretionary and 27.6% position in consumer staples. Additionally, the ETF holds a number of internet e-commerce names, including 5.4% in JD.com (NasdaqGS: JD) and 5.2% in Alibaba Group (NYSE: BABA).
Alternatively, a number of China tech ETFs also include some exposure to a number of consumer-related companies. For example, among their top holdings, KraneShares CSI China Internet Fund (NasdaqGM: KWEB) holds BABA 9.5%, 7.4% CTrip (NasdaqGS: CTRP) and 6.7% JD; Guggenheim China Technology ETF (NYSEArca: CQQQ) includes BABA 8.6% and Lenovo 5.5%; Global X NASDAQ China Technology ETF (NasdaqGM: QQQC), a direct rival to CQQQ, has 7.0% Lenovo.
If the government delivers on its planned reforms, Chinese consumers could spend $67 trillion over the next decade, reports Enda Curran for Bloomberg.
Additionally, the Beijing has nudged its citizens to save less and spend more, shifting the economy away from debt fueled investment toward consumption. While China’s economy has expanded, investment-led growth in GDP has outpaced consumption growth.
“There are signs that the decline in consumption’s share of GDP may have abated, but it has certainly not yet been reversed,” Louise Keely and Brian Anderson of The Demand Institute told Bloomberg.
According to The Demand Institute, if the Chinese economy expanded 7%, the most likely scenario, consumption share of GDP could remain at about 28% between 2015 and 2025, accounting for 330 trillion yuan, or $53 trillion.
If growth slowed to 4%, consumption could hit 46% of GDP output by 2025, or an annual spending increase of 126%, to 420 trillion yuan, or $68 trillion.
The think tank argues that the economy will also enjoy a good boost from Chinese consumers since consumption can take off from a relatively low base. From 2011, consumption in China made up 28% of real GDP, compared to 76% in the U.S., 67% in Brazil, 60% in Japan, 59% in Germany and 52% in India.
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Max Chen contributed to this article.