The rise of the Chinese middle class will be one of the biggest tailwinds for Australian companies over the next decade and I believe it is important for investors to factor in the positive impact this could have on particular shares.
China has a population 55 times larger than that of Australia and the proportion of people rising into the middle and higher classes is growing rapidly. Not only will this shift improve the living standards for hundreds of millions of individuals, it will also bring with it a rise in disposable income that Chinese consumers will be able to spend at their own discretion.
Australian investors have already witnessed how lucrative the Chinese market can be to some companies with the meteoric rise of shares like Blackmores Limited (ASX: BKL) and Bellamy's Australia Ltd (ASX: BAL).
Although these are probably the two companies that are most often associated with the Chinese demand thematic, there are a myriad of other companies that also look like they will benefit from the rise of the Chinese middle class.
With that in mind, here are four shares that look well placed to grow their businesses with the help of the Chinese consumer:
BWX Ltd (ASX: BWX)
The owner of the Sukin beauty and skin care brand has enjoyed strong investor support since listing in November 2015 with the shares gaining more than 133%. Sukin has become Australia's number one selling 'natural' skin care brand in pharmacies and is currently growing at more than twice the rate of the broader skincare market. Importantly, the range focuses primarily on natural products and this is one of the key aspects that really appeals to Chinese consumers. BWX is still in the early stages of exporting Sukin directly into China, but the company has stated that this will be a primary focus for the future.
Star Entertainment Group Ltd (ASX: SGR) and Crown Resorts Ltd (ASX: CWN)
One of the biggest benefits of higher discretionary income is the opportunity to travel abroad. Australia is one of the most popular destinations for Chinese tourists and figures released by Sydney Airport Holdings Ltd (ASX: SYD) earlier this week, once again confirmed that Chinese tourist numbers are growing at double-digit rates. One of the most popular destinations within Australia's capital cities are casinos and growing patron numbers should translate into higher profits for companies like Star Entertainment and Crown Resorts.
Navitas Limited (ASX: NVT)
As the middle class of China continues to grow, the opportunity for individuals to gain a better education, both domestically and abroad, will also grow. Navitas is one company that is well placed to benefit from the growing demand for education as it provides tertiary education pathways in the three top English-speaking destinations for international students – Australia, the United Kingdom and the United States. This will be a long-term tailwind for the company, although investors should be mindful that much of the company's success relies on maintaining the strong relationships it has developed with tertiary education providers.
Foolish takeaway
The rise of the Chinese consumer should not be underestimated and Australian companies will be some of the biggest winners from a growing middle class. Although some of the shares exposed to the region look expensive right now, it is important for investors to remember that this is a long term thematic and opportunities will eventually be presented to the observant investor.
