In 1950, the United States was on the cusp of a boom that would produce the largest middle class in history. It was also the beginning of a surge in the U.S. economy that would make it one of the richest countries ever.
As we’ve told you before, China today is on the verge of something similar.
In 2000, just four per cent of China’s urban population was considered middle class. By 2022, that figure will be a whopping 76 per cent. That’s over 550 million middle-class people in China. To put this in perspective, it’s middle class will be 1.7 times the entire population of the U.S.
A growing middle class means Chinese consumer spending will surge too. It’s set to increase 55 per cent between 2015 and 2020.
And just like the U.S. did during its boom, China’s middle class is set to spend its money on healthcare, education and fast food…
The massive shift in Chinese healthcare
Right now, the Chinese government provides some form of health insurance to almost all of its 1.4 billion citizens.
But public healthcare is a mess. There are simply too many patients for the poorly paid public doctors to care for. As a result, lines are long, and standards of care are poor for most Chinese citizens.
Distrust and frustration often boil over to the point where people humiliate or attack medical personnel when they feel their loved ones have been mistreated or neglected. For the typical Chinese citizen, a trip to a public hospital is unpleasant at best, and a nightmare at worst…
So with more money, the middle class is demanding better healthcare.
McKinsey & Company estimates that driven by the middle class, private healthcare spending in China will grow to $US1 trillion by 2020, up from just over $US350 billion in 2011.
The Chinese government is keenly aware of the frustrations of its citizens. So in 2011, the government took the first steps to allow private ownership of hospitals.
As a result, 2015 marked the first time that the number of private hospitals accounted for over half of the whole market. Still, the volume of services delivered by these small, private providers only accounted for 15 per cent of the total amount of services provided to Chinese families. So there’s tons of room for growth.
Big upside potential from the “Golden Age” of Chinese education
China’s growing middle class is also rapidly spending more money on education and tutoring.
Parents are worried their children will have to compete even more fiercely for good jobs than they had to. And the Chinese economy is shifting from manufacturing towards services. That means the definition of a well-paying job is rapidly changing.
So parents are enrolling their children into the best pre-schools, middle schools, high schools and universities they can afford. They’re also to paying for extra tutoring.
According to consultants Deloitte Research, the Chinese education sector will expand at a 12.7 per cent compound annual growth rate (CAGR) over the next three years, to generate revenue of nearly $US440 billion in 2020. In fact, Deloitte calls this the “golden age” in Chinese education.
The growth in China’s restaurant industry
Fast food is convenient, quick and it has a variety of options. It’s also cheaper than eating at full-scale restaurants. That’s why the Chinese middle class — increasingly urbanised and pressed for time — is spending its new money on fast food.
According to IBIS Word, over the five years through 2016, revenue Chinese fast food restaurant industry has grown at an annualized rate of 10 per cent. And That number is expected to grow as the middle class does.
As a result, many Chinese fast food restaurants are about to see profits soar… along with their share prices.
Putting it together
To sum up, these three sectors are creating massive opportunities for investors.
Remember, the Chinese middle-class boom is similar to the one that started in the U.S. in 1950. Investing during the U.S. boom made investors a lot of money.
- US$1,000 invested in Standard Oil (Exxon) in 1950, for example, would have become $US2.4 million by 2016
- US$1,000 invested in tobacco giant Philip Morris in 1957 would have become $US5.5 million by 2007
- US$1,000 invested in McDonalds in 1965 would have become $US4.1 million by 2016
We could see similar gains from each of these sectors. So if you’re looking to profit from the Chinese consumer boom, start with healthcare, education and fast food.
P.S. We’ve uncovered three companies in each of these industries that are set to soar from the Chinese middle class. Each of these stocks could double over the next year.
And it couldn’t be simpler to invest in these stocks. They all trade on major exchanges. That means you’ll likely be able to buy them from the brokerage account you already have.
You can learn more about the massive opportunities being created from the Chinese middle class — and these companies — right here.
More from Stansberry Churchouse Research:
- These three fast-growing markets probably aren’t on your radar
- Why bitcoin is money
- With midnight looming… make sure you own gold
- Five lessons from one of the greatest real estate deals of all time
- This emerging market is still stuck in the past
This article originally appeared at Stansberry Churchouse Research. This is a guest post by Stansberry Churchouse Research, an independent investment research company based in Singapore and Hong Kong that delivers investment insight on Asia and around the world. Click here to sign up to receive the Asia Wealth Investment Daily in your inbox every day, for free. Copyright 2017. Follow Stansberry Churchouse Research on Twitter.
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