China's President Xi Jinping Is Meeting Trump Just as There Is a Renewed Wealth Boom in His Country

With relations between China and the U.S. slightly warming ahead President Xi Jinping's first visit to meet President Trump on Wednesday, China and its economy are front and center again.

To be sure, growth of the world's second largest economy has slowed, but it's GDP is still expected to expand by 6.5% this year. It was rose 7% in 2015 and 10% in 2010. 

That surprisingly resilient growth -- which is leaving a growing class of Chinese with more money in their pockets -- could mean several well-known brands cash in. 

"Chinese consumers are also increasingly trading up from mass products to premium products: we found that 50% now seek the best and most expensive offering, a significant increase over previous years," wrote Daniel Zipser, Yougang Chen and Fang Gong in the McKinsey & Co. report "Here comes the modern Chinese consumer."

Here are some of the biggest winners.

Newly wealthy Chinese shoppers often go for the best apparel and accessories brands.
Newly wealthy Chinese shoppers often go for the best apparel and accessories brands.

"Consumers are becoming more selective about where they spend their money, shifting from products to services and from mass to premium segments," wrote authors of the McKinsey report on modern Chinese consumers.

Luxury European apparel brands with a presence in the country, such as Dolce & Gabbana, GucciHugo Boss, Christian Dior (CDI) and others could build steady relationships with Chinese consumers who have more extra cash to spend and are opting for high quality goods. The same goes for accessories companies also in the region like Michael Kors (KORS)  , Louis Vuitton and Coach (COH) . 

But to truly cash in, all of these retailers must be tech savvy. If retailers don't factor in the tech-driven life of most Chinese shoppers, it's a sure way to lose.

The country's online retail market is the world's largest, nearly 80% bigger than the United States', which it overtook some three years ago. E-commerce in China accounts for 13.5% all retail spending, a higher share than that of all large economies but the United Kingdom, according to the McKinsey report "How savvy, social shoppers are transforming Chinese e-commerce," by Kevin Wei Wang, Alan Lau and Fang Gong.

The authors cited four major areas of growth:

  • Uptake of online shopping among consumers in low-tier cities.
  • E-commerce penetration beyond first-mover product categories such as apparel.
  • Purchases initiated from social media platforms.
  • Use of cross-border shopping to supplement domestic channels.

But there are challenges for the retailers even if they are tech-friendly, wrote the authors: "Capitalizing on opportunities is becoming harder for consumer-facing companies as e-commerce penetration rates plateau in high-tier cities and as digital attackers, especially in the online-to-offline space, cut into incumbents' margins."

Ford could really join the list of winning automakers in China.
Ford could really join the list of winning automakers in China.

Sales of Ford's (F) Lincoln brand are doing so well in China, the automaker for the first time is serious competition for brands such as Mercedes-Benz, General Motors (GM) Cadillac and BMW that are benefiting from the rising wealth of the Chinese. Ford reported that it sold nearly 33,000 Lincolns in China in 2016, about triple the number from last year. The company sold a record 1.27 million autos in China last year.

So robust are sales that now the American automaker is planning to start building Lincoln vehicles in China by the end of 2019

Advertisement

More from Stocks

3 Simple Tips on Investing From TheStreet's Jim Cramer

3 Simple Tips on Investing From TheStreet's Jim Cramer

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Tesla CEO Elon Musk Is a Rock Star: Kiss Icon Gene Simmons

Tesla CEO Elon Musk Is a Rock Star: Kiss Icon Gene Simmons