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- 25 May 2019
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We're approaching the end of week 1, June 2019. The G20 is in about 3 weeks, and there seems to be no deescalation of the ongoing trade dispute between USA and China; in fact, it's further escalating e.g.: Mexico.
Having said this, I think it's important that we take a step back and really view what this all means to China in the greater scheme of things:
In light of this, we really have to ask ourselves whether the most recent market selloff is overdone. I think it is, and have been doing a deep dive into Alibaba; based on my research, I believe Alibaba will benefit more from China's impending tailwinds more than any other company in China - the ecosystem they're creating is scary, and I believe the market has got it wrong by taking such a reactive/short-term view.
Having said this, I think it's important that we take a step back and really view what this all means to China in the greater scheme of things:
- China is poised to double their consumption (at least) by 2030;
- GDP will still grow at ~6% for another 3 years, slowing to 4 - 5% for the next 5 - 10;
- The number of online shoppers in China will almost triple the entire population of the USA
- China has created over 70 million service jobs in the last 5 years, but only lost 14 manufacturing jobs
- The Chinese middle, upper-middle, and upper class will triple in size in 10 years - totaling ~600 million
- Chinese disposable income will more than triple
- China will become a net importer like the USA, and will consume at an exponential rate - in 2018, net imports increased to >$2.1T - a 15.8% increase YoY
- The lower tier cities in China will grow faster than the upper tiers; their spending/consumption and net population already exceed the T1/T2 cities, and the income gap between upper tier vs. lower tier is narrowing
In light of this, we really have to ask ourselves whether the most recent market selloff is overdone. I think it is, and have been doing a deep dive into Alibaba; based on my research, I believe Alibaba will benefit more from China's impending tailwinds more than any other company in China - the ecosystem they're creating is scary, and I believe the market has got it wrong by taking such a reactive/short-term view.