The latest from China’s leadership represents some pretty dramatic changes to be implemented under new President Xi Jinping. Perhaps the most noteworthy change is a loosening of the country’s one-child policy. The new reforms would allow couples to have two children if one of the parents is an only child.
But the most encouraging, and most investable, reform goal coming from the latest meeting might have been China’s realization that it needs to further balance and mature the Chinese economy. China recognizes the need to change from an export-driven economy (meaning the world’s factory) to one that also has a strong consumer demand element to it (similar to what happened in the U.S. in the years following the Industrial Revolution in the late 19th and early 20th centuries).
From a long-term investment perspective, this means you should to move away from the thesis that says you should “buy what China buys,” (i.e., industrial metals such as copper and steel), and “buy what the Chinese consumer buys.”
To those of us who are more familiar with China’s economy, that thesis isn’t anything new. However, the latest China reforms cement the notion, making a bullish argument for many Chinese stocks — particularly those that tap into the rise of the middle-class consumer.
Here are five Chinese stocks to play the recent reforms.