When your country gets wealthier, you spend more of your money on things that aren’t food.
So it’s not surprising that Chinese urban consumers now spend 14 percentage points less of their budget on food today than they did in 1995, US Funds’ Frank Holmes.
Within the country, more and more residents are relocating to the cities to get higher paid jobs and acquire discretionary income. In addition, government economic, social, rural and welfare policies are influencing the cost of goods.
As a result, they’re now spending much more on clothes and medicine:
Photo: Jefferies via US Funds
Holmes concludes that this is great news for Chinese stocks:
…reforming the hukou (urban residency) registration system will likely have a tremendous influence on China’s economy, and this is especially true in the consumer space. For the China Region Fund, we believe stocks in the consumer discretionary sector will profit from the increasing renminbi in residents’ pockets.
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