There are cracks emerging in the growth story from Australia's most important trading partner but those worried about a slowdown in China impacting on the ASX will be relieved to read a report on last week's Credit Suisse Asian Investment Conference.
While there are certainly pressure points in the world's second largest economy, the slowdown is being offset by growth in tier-3 cities that are likely to provide support the share prices of a range of stocks on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO).
Support is what's badly needed right at the moment with the top 200 index sinking 0.5% this morning in the face of rising volatility on global markets.
The largest and best known Chinese cities have done their sprint with construction and investments slowing in places like Beijing and Shanghai. But experts at the conference are sanguine on China as they've noted strong housing investment and targeted wealth creation in these lesser known and smaller cities.
This is significant because there are around 363 Chinese cities that can be classified as tier-3, which makes up about 55% of all cities in the country, according to data from Wikipedia.
What's more, there are 13 million people looking to urbanise in tier-3 cities every year and Credit Suisse estimates that China needs 90 million new apartments in the next five years.
"Chinese developers were bullish on tier-3 city projects and believe the outlook is supported by central government policy," said Credit Suisse.
"LNG consumption has grown considerably and demand looks set to rise further. Outbound tourism seems set to grow at a double-digit pace and more travellers to Australia are likely to come from tier-3 cities."
That is great news for our miners like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), while Credit Suisse added South32 Ltd (ASX: S32) to its model portfolio.
Tourism related stocks also look well placed to reap the benefits from the rise of tier-3 cities. Australia is one of the top destinations for Chinese tourists and its stocks like hotel operator Mantra Group Ltd (ASX: MTR), airport operator Sydney Airport Holdings Pty Ltd (ASX: SYD) and theme park operator Ardent Leisure Group (ASX: AAD) that will be smiling.
But there's another sector that also has a bright outlook, regardless of China's economic growth, according to the experts at the Motley Fool.
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