Photo: Andrew Vanburen
Main source: Story in Securities Times
THE GREATEST human migration in history has taken place over the past three decades in China, helped by Chinese leader Deng Xiaoping’s prophetic proclamation years ago: “To be rich is glorious.”
Little did he know at the time that comments like this would convert China from a majority rural to a majority urban society by 2011.
So who’s likely to cash in on the demographic revolution?
The high-level economic powwow that wrapped up in Beijing on Dec. 16 featured: “New Urbanization” as a major talking point.
The attendees reached a consensus that the earth-shaking migration of the equivalent of more than the US population from the Chinese countryside packing up its belongings and heading to its cities over the past couple decades has been somewhat haphazard.
Therefore, more attention should be paid to the quality of life of the newcomers to the urban areas – whether they are seasonal migrant labor or educated engineers and executives.
Regardless of whether Beijing officials can effectively bring about a transformative improvement in the often troubling standards of living of newcomers to China’s developed urban areas is a subject best left to academia and the experts in the social sciences.
But as a practical matter, the Beijing conference attendees all agreed that this rapid urbanization of the world’s most populous country and its second biggest economy – the PRC officially became majority urban sometime last year – presents tremendous opportunities for local and overseas firms to sell to these new and seasoned city dwellers alike.
In short, the clarion call for “decoupling” – codeword for reducing overreliance on the generous spending habits of Westerners and relying more on Chinese themselves to boost the domestic economy – is being responded to in stentorian terms by the growing ranks of Chinese urbanites and their increasingly dispensable incomes.
China’s rapidly growing cities, in other words, could be the answer to sustaining China’s long-customary high GDP figures, as consumers in the US and EU are increasingly unable to continue lapping up China’s surplus output given tepid economic expansion in those markets.
Given the growing demand for goods among the growing urban populations in China, and the intensifying requirements on infrastructure and capital goods investment that these incoming masses bring with them, it is only to be expected that some listed firms are poised to benefit tremendously from this massive internal migration.
Infrastructure
Hundreds of millions of new city dwellers obviously need roofs over their heads, and means by which to get to work.
Residential and commercial property developers, cement manufacturers as well as building material plays are three of the biggest expected beneficiaries of China’s continued urbanization – at least as far as infrastructure-related listcos are concerned.
Guotai Ju-an Securities forecasts that China’s domestic cement demand will rise 6.9% and 7.3% in 2012 and 2013, respectively, with suppliers best positioned to benefit including Anhui Conch Cement (HK: 0914; SHA: 600585), Huaxin Cement Co Ltd (SHA: 600801), Henan Tongli Cement Co Ltd (SZA: 000885), Tangshan Jidong Cement Co Ltd (SZA: 000401), Jilin Yatai Group Co Ltd (SHA: 600881), Jiangxi Wannianqing Cement Co Ltd (SZA: 000789), Xinjiang Tianshan Cement Co Ltd (SZA: 000877), with Guotai’s top sector picks being Anhui Conch and Huaxin.
Glass
With the lure of car and home ownership intensifying in the cities – both for practical and social reasons – glassmakers are seen as big beneficiaries of ongoing urbanization.
CSG Holding Co Ltd (SZA: 000012), Anhui Fangxing Science & Technology Co Ltd (SHA: 600552) and Zhuzhou Kibing Group Co Ltd (SHA: 601636) are all the likely big winners in this field.
Building materials
Also, building material providers and infrastructure-related developers are all clear-cut winners in the city-friendly demographic shifts taking place in China.
Therefore, these manufacturers and suppliers are all smiling broadly as China’s cities bulge even further, with an emphasis on supplying and maintaining clean water to growing ranks of urbanites:
Shandong Longquan Pipeline Engineering Co Ltd (SZA: 002671), Ningxia Qinglong Pipes Industry Co Ltd (SZA: 002457), Fujian Nachuan Pipe Technology Ltd (SZA: 300198).
And to build all the new subway lines needed, Zhejiang Kaier New Materials Co Ltd (SZA: 300234) is well-positioned to win its fair share of contracts.
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