Trillions of dollars of investment wealth will flow from China over the coming years. Here’s one way to be a part of it
When’s the last time you thought about cement?
Yes, it’s a random question, but please go with me for a moment.
We don’t really think about it, at least those of us in the construction business don’t. But unless you live in a highly rural area, cement surrounds your daily life. It’s the literal foundation of our cities, and by extension, our normal, everyday routines.
Now, think about how much cement had to be created here in the U.S. during the 20th century in order to support our country’s massive growth.
For example, I live in Los Angeles. Here’s a photo of Hollywood in 1905. Basically farmland.
And here it is today …
Now, think beyond just Los Angeles. Consider all the growth that’s occurred throughout the rest of the United States over the entire 20th century — New York, Chicago, Boston, Dallas, Phoenix …
Try to wrap your mind around the staggering amount of cement that was required to facilitate all 100 years of that growth.
Ready for the punchline?
Since 2013, China’s growth has been so massive, it has produced more cement every two years than the U.S. did during the entire 20th century.
***China’s staggering growth can lead to huge gains for your portfolio
Here in the Digest, one of our goals is to track massive trends — those societal, technological, or demographic changes that affect our daily lives, and in doing so, create ripple effects through the investment markets that lead to life-changing wealth.
Some of the trends our analysts have been using to generate investment gains for our readers include legalized marijuana, 5G telecommunications, and next-generation batteries, among others. Last month, we officially added a new trend to the list — China.
In short, China is a major world power, and even though its volcanic growth over the last two decades has slowed, the country is still experiencing massive growth — and at a far faster pace than here in the U.S. Best of all, as it continues to grow over the coming years, it’s going to create trillions of dollars of new investment wealth … and we can get there first.
Our resident China bull is Matt McCall, editor of Investment Opportunities. Matt was in China two months ago, doing “boots on the ground” research, and what he saw related to investment possibilities blew him away.
In today’s Digest, we’re going to narrow in on one aspect of the China growth story that Matt is especially bullish on. As our “cement” intro hinted at, it involves China’s infrastructure/real estate boom. I don’t even think “boom” is an adequate word to describe what’s happening.
But I won’t ask you to take my word for it — see for yourself.
***The explosive growth of China’s cities as the nation continues to urbanize
As Matt tells us in his June issue of Investment Opportunities, in 1978, 17.9% of the Chinese population lived cities. By the end of 2017, that number had surged to 58.5%.
But this trend is far from over. According to Global Demographics, China’s urban population will increase from 834 million today to 989 million by 2028. That’s almost one billion people in China’s cities, which would represent 70% of the total population.
Let me turn to Matt to help contextualize this staggering growth:
In less than a decade, 155 million people are expected to move into Chinese cities. That’s equivalent to the combined populations of the United Kingdom, Italy, and Australia. It’s roughly half of the United States.
But let’s find a way to help this sink in even more. Matt tells us that according to Portwood Capital, the combination of urbanization alongside normal growth points to the need for 115 billion square feet of housing in the next 15 years. That’s approximately 37 Londons or 29 New York Cities!
Here’s Matt on the creation of these new, mega-cities:
After my trip to China, I am pleased to report that what I saw and learned about the country’s real estate confirmed what the numbers were telling me. Both the data and my in-person research are signaling a long-term investment opportunity we do not want to pass up.
With the ongoing urbanization trend, Asian infrastructure spending isn’t slowing down anytime soon. The region currently outpaces other developed areas by 50%. More than 50 new airports are being built in China along with 30,000 kilometers of new high-speed railway, so urbanization will accelerate in the next decade. This will lead to increasing demand for housing and infrastructure in urban areas.
Then there is the plan to quite literally create new major cities throughout the country. I borrowed the map below of China’s City Cluster Plan from our friends at Stansberry Asia-Pacific to illustrate the magnitude these intentions. I saw some of this construction with my own eyes … the cranes … the earth movers … the workers. It is as real as real gets.
***So, how can an investor play this massive housing boom?
One company Matt likes is called Country Garden Holdings Company Limited (2007.HK). It’s China’s leading real estate developer based on sales. And according to Forbes, it is also one of the 500 largest companies in the entire world.
Now, as an example of why Country Garden is in a great position to capitalize on construction growth, we actually have to turn to another trend which Matt covers — electric vehicles.
You see, China is a world-leader in the electrification of cars.
I’ll let Matt explain how these two trends are intertwining:
At least 20 Chinese cities are striving to become the electric vehicle (EV) version of what Detroit was for original auto industry. Whether you like it or not, EVs are inevitable. Because China is the current leader in their production, it makes sense that there is a big emphasis on creating production “hubs” throughout the country.
At first, I was skeptical that this could even happen. But then I learned that $30 billion worth of investments is already committed to building out these EV cities.
One such city is Shunde New Energy Vehicle Town. It is a “mini-city” located within Foshun, a Tier 2 city in southern China. Shunde is attempting to become one of the first “Detroits of China.” Local officials believe that the planned mini-city, which was created for the production of EVs, could eventually generate $15 billion in revenue.
Now, which construction company is developing Shunde?
You guessed it — Country Garden.
***But this is just one reason why Matt likes Country Garden
You see, the main driver behind the current real estate boom in China is urbanization — all of these people moving to cities need places to live. Matt tells us we will see a lot of movement from the rural villages into major Tier 1 cities such as Shanghai and Beijing, but the bigger opportunity is in the smaller Tier 3 cities.
Though you might think a Tier 3 city is, perhaps, a small fishing village, the reality is Tier 3’s can have up to a million people. For perspective, there are only 10 cities in the U.S. with a population of 1 million+ people.
The top 50 Chinese cities are considered Tier 1 or Tier 2. The next 70 fall into the Tier 3 category. And it’s the Tier 3 cities that will see the largest influx of residents and will require widescale property development to accommodate them.
Back to Matt on why this is great news for Country Garden:
Country Garden is a leader in the development of Tier 3 cities. In just the last three years, these cities have accounted for nearly 80% of the company’s new land acquisitions as it prepares for the coming boom. In fact, Country Garden has purchased more Tier 3 land than any of its competitors.
***China is a massive growth story that will play out over many years
Look past the trade war headlines. Look past the doom-and-gloom claiming China’s days of hyper growth are in the past.
The reality is — quite literally — trillions of dollars of investment wealth will come from China in the coming years. You’re going to see us cover this trend in the Digest a great deal because it’s going to be one of the best ways to generate major investment wealth in the next decade.
If investing in China hasn’t been something you’ve truly considered to date, I hope you’ll begin changing your mind. The opportunities are enormous — we’ll keep you up to speed on where to find them.
To learn more about what Matt saw on his trip to China, as well as his top picks for taking advantage of this massive growth, click here. Bottom line — the China growth story is far from over, and we have the chance to be a part of it.
Have a good evening,