To me, China is rather like Manchester United. Some people love them. Some people loathe them. But whatever your viewpoint, you cannot fail to have an opinion on them.
The negatives can be very negative. Remember Tiananmen Square? Or Tibet? Or, more pertinently today, people will talk about the way Chinese manufacturing industry seems to have steamrollered the rest of the world in brutal fashion.
China is already one of the richest nations on Earth
Much of the world’s manufacturing industries, whether you are talking about televisions, T-shirts or coffee tables, are based in China. There are a bevvy of Chinese multinationals ranging from Huawei and Lenovo to SsangYong which seem intent on taking over the world. What’s more, even if you are a Western company such as Apple or Marks & Spencer, you will design your smartphones and dresses in the West, only for them to be made in China.
So where are most of the well-paid manufacturing jobs in the world going? Well, to China, of course. This has led to a decimation of industry in other countries. Many of the heartland states in the US, such as Illinois, Texas and Louisiana have felt this particularly heavily.
But then there are the positives. China is already one of the most powerful and richest nations on Earth. How can you ignore a country of 1.3 billion people? They are bright, entrepreneurial and hard-working. And what’s more, they have money to spend. Lots of it.
Even now, not all the Chinese are as rich as the West. But you cannot ignore a middle-class of 300 million people. China is becoming not only the world’s leading producer, but also the world’s leading consumer, and this spells opportunity.
To make money, UK businesses must sell to it
Because what companies across the West are good at is building brands; and the Chinese will lap these brands up. Unilever can sell Dove soap, Persil washing powder, and Flora margarine. And SuperGroup can sell its SuperDry T-shirts and hoodies.
But the market entends beyond consumer goods. AstraZeneca and GlaxoSmithKline are expanding drugs sales as China develops its own nascent healthcare system. And financial businesses such as HSBC and Prudential are set to boom as China opens up its financial markets and the nouveau riche of China look to invest their new-found wealth and begin to plan for a prosperous old age.
So, yes, there are good sides and there are bad sides to China – everyone knows this. And it is so big, you can’t really ignore it. So how do you play China?
Well, just emphasise the positives, and minimise the negatives. I think China is now so big and so powerful it is difficult to take on; most countries are now realising there is no point fighting China. Instead, we have to make friends with it.
Investors will see the impact of China on many FTSE 100 companies; profitability is being squeezed as we adapt to the low-cost, China-focussed world of tomorrow. But you should pick out the winners that will sell to the Middle Kingdom: firms such as Unilever, Next, SuperGroup and GlaxoSmithKline.
And you should also invest in China, through well-researched funds such as Fidelity China Special Situations, as booming Chinese company profits feed through to the stock markets of Shanghai and Hong Kong. China is already the workshop of the world. It will soon be its marketplace too.
What you can’t do is run away and hide. China is the main force for change in this world. And you must embrace it.
