While Covid-19 caused a short-term shock to the Chinese economy, the government’s quick and comprehensive mobilisation at the start of the pandemic has meant that the cyclical impact on markets has been short-lived. Meanwhile, as with many economies, the pandemic has accelerated certain structural trends in China that were already under way. We continue to find the most attractive opportunities in consumption, technology and healthcare, which are capitalising on China’s transition to a more consumer-driven economy.
Driving this shift is the country’s growing millennial population, which stands at around 400 million – more than the working population of Europe. This has had a huge impact on the technology and e-commerce sectors, cementing China’s position as the world’s number-one retail market.
Fresh food in 30 minutes
As Chinese millennials continue to demand various services at their fingertips, the growth opportunities in the consumer discretionary sector look compelling. Meituan Dianping (Hong Kong: 3690) is a prime example of a multi-level technology service platform enjoying accelerated growth in its user base.
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The firm, whose unique selling-point is its ability to have fresh food delivered in 30 minutes within a three-kilometre radius, is the country’s leading website for locally sourced food-delivery services, consumer products and retail services. Since the beginning of the pandemic, merchants have accelerated their migration to online distributors such as Meituan, particularly branded restaurants with high-quality offerings that have traditionally focused on in-store dining instead of delivery services.
Technology is taking off
The technology sector is another key area that continues to offer huge long-term potential. Chinese millennials are more tech-savvy than previous generations, with over 90% having access to a smartphone. One of the companies benefiting from the acceleration in demand for technology is Bilibili (Nasdaq: BILI), a video-sharing platform with an emphasis on animation, comics and games. It is similar to the app TikTok.
It is a prime example of a “New China” company profiting from the changing consumption patterns of a new generation. Highlighting the exceptional levels of daily activity on its platform, in the third quarter of 2020 Bilibili reported total net revenues of $475.1m, an increase of 74% from the same period in 2019.
A robust outlook for healthcare
Even before the outbreak of Covid-19, China lacked adequately widespread diagnostic and healthcare facilities and suffered shortages of vaccinations for illnesses such as the regular flu. As consumers’ expectations rise, a focus on raising healthcare spending remains a clear trend, especially in outsourced clinical testing, diagnostics and vaccinations.
For example, the pandemic has shone a light on underinvestment in hospitals, where intensive care beds comprise a mere 5% of hospital beds compared with 15% in developed markets. This provides ample scope for long-term growth for companies such as Shenzhen Mindray Bio-Medical Electronics (Shenzhen: 300760), which manufactures medical equipment and is increasingly successful in export markets given its focus on research and development.
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