"Political power transition will remain an overhang until the final list of Politburo is announced or confirmed," says Joseph Tang, investment director at Invesco in Hong Kong. "The political infighting will remain a hurdle for the central government to come up with quick and effective policy initiatives in tackling the current economic problems."
Those policy initiatives will push ahead with the 2011-2015 five-year plan for elevating domestic consumption as a driver of GDP growth. Healthy consumption would reduce China's dependence on exports to countries with waning demand.
Policies that raise consumption will in turn increase the sales of foreign companies that sell en masse to the masses. No-brainer beneficiaries will be firms that are well-entrenched in China. They're the ones that have sunk money into the country. They know who to pay off, how to avoid scams and what to do with their inscrutable Chinese joint-venture partners.
How about Procter & Gamble (PG)? P&G reports annual China sales of $2 billion with a "No. 1 market share position in all categories where we compete." That means Chinese are hogging up Rejoice, Safeguard, Olay, Pampers, Tide and Gillette, according to the company's immodest website. P&G also claims a No. 2 position in volume.P&G share prices are at their second highest point in history, however, and analysts suggest holding any that might be in your portfolio. To buy, wait for China to launch pro-consumer policy and then for an unrelated dip in share prices that would turn positive again on China sales. On another supermarket shelf, check out PepsiCo (PEP). In July it announced the opening of its sixth greater-China plant, a 25,000-square-meter fab that can make up to 15,000 tons per year of its signature Lay's potato chips. The company also picked a local partner this year to smooth drink sales and distribution. PepsiCo stocks have climbed steadily since the global financial crisis in early 2009 and buying more is still recommended. But the government knows its consumers aren't rich or loose enough to replace investment in the short term, so the new leadership will keep fueling the twin all-weather growth engines of infrastructure spending and huge real estate projects.
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