China’s middle class is on fire. By 2022 over 550 million people in China will be considered middle class. That would make China’s middle class alone big enough to be the third-most populous country in the world.
At the same time, and not coincidentally, Chinese consumption – the amount of stuff people buy – is expected to grow 9 percent a year through 2020, according to the Boston Consulting Group. Overall, the consumer economy is forecasted to grow by 55 percent, to US$6.5 trillion. That’s an increase of US$2.3 trillion – which is like adding a new consumer market 1.3 times larger than the current consumer markets of Germany or the U.K.
This year’s Singles’ Day shows how much Chinese consumption is growing. Singles’ Day is a one-day sales event of China’s online sales giant Alibaba. It’s like the U.S.’s Black Friday and Cyber Monday rolled into one, only bigger – it’s the largest online shopping event in the world.
This year, Alibaba saw US$1 billion in sales in the first five minutes of Singles’ Day. In two hours, Chinese consumers had purchased US$7.2 billion worth of goods. By noon, the total was US$11.9 billion… and the day’s final total was US$17.9 billion – 24 percent higher than last year’s total. In fact, it only took 15 hours to eclipse last year’s total.
This means that Chinese consumers were spending US$741 million per hour – just online at Alibaba. The day’s total is equivalent to the total economic output of Cambodia in 2015.
What people do when they get money
Besides spending their money on stuff, another arena where China’s middle class consumers are spending their money is travel. When people go from having only enough money to buy the basics, to having extra money to spend, they tend to spend it on – among other things – health, education and leisure activities like travel.
I saw this evolution unfold years ago in Russia when I lived there starting in the mid-1990s. For decades, citizens of the former Soviet Union hadn’t been allowed to travel, except in very special circumstances.
After the end of the Soviet Union in 1991, travel restrictions were eased. But it wasn’t until the economy stabilised years later (and commodity prices rose), and people began to have more money, that international travel took off. Eventually, the then-emerging Russian middle class started to fly to European destinations on holiday, rather than to resorts in Russia and the former Soviet Union that had been the extent of the menu of vacation options for their parents. Today, you’ll hear Russian spoken in tourist spots all over the world.
And similarly, almost anywhere in the world – from Auckland to Paris to Buenos Aires – you hear a lot more Chinese than you would have a few years ago. The millions of new Chinese tourists are changing the global travel industry.
Legendary investor Jim Rogers recently described Chinese tourism as “one of the great growth industries of our time.”
The Chinese tourism boom
As Rogers sees it, there’s enormous pent-up demand for travel in China. For decades, it was difficult for regular people in China to get a passport. And, more to the point, few had enough money to travel anyway.
Increased air traffic at China’s main airports says it all. In 2000, not one Chinese airport ranked in the top 30 globally in passenger numbers. Now Beijing Capital International is the second-busiest airport in the world. Over 89 million passengers flew through it in 2015, up 315 percent since 2000.
Meanwhile, the number of passengers who have traveled through Atlanta, in the U.S. state of Georgia, which – for now – is the world’s busiest airport, increased by just 27 percent over the same period.
As shown in the chart below, Hong Kong International Airport now ranks number 9, and Shanghai Pudong International and Guangzhou Baiyun International both recently climbed into the top 20.
China will pass the U.S. to become the world’s largest aviation market by passengers by 2024. Chinese air passenger traffic will double to 927 million passengers a year by 2025 (compared to the U.S.’s 904 million by 2025). By 2035, the number will hit 1.3 billion. Chinese tourism is soaring.
The Chinese tourism company trading at fire-sale prices
In coming days we’re going to announce something new with Truewealth Publishing… and as part of this, I’ll tell you about a market where a company that’s deeply involved in Chinese tourism is trading at fire-sale levels. That’s coming soon.