Bigger Cities in China Should Mean Bigger Profits for Coach, Michael Kors

NEW YORK (TheStreet) -- Some of the best-known western companies, including Yum! Brands (YUM), McDonald's (MCD), Bombardier, Coach (COH) and Michael Kors (KOS), should all do well as a result of more Chinese living in cities.

In an interview earlier this year in Barron's, Carl Weinberg, chief economist for High Frequency Economics, was bullish on China due to the increasing urbanization. Weinberg stated in the interview that China "grows by moving people from the farms to the cities, and every time someone moves off the farm into the city, they contribute six times more to GDP than they did on the farm. If you do this 10 or 20 million times per year, you get six percent to eight percent GDP growth just out of the demographics. So that's my outlook for China."

A major change from the urbanization of China will be in diet. More affluence leads to more meals being consumed at restaurants like McDonald's and those of Yum! Brands such as KFC, Pizza Hut and Taco Bell. Yum! Brand was the first "quick service" restaurant in China with KFC back in 1987. At present, there are more than 6,000 Yum! Brand restaurants in 850 Chinese cities. McDonald's has almost 2,000 franchises currently in the People's Republic. Studies show that as consumers move up to the middle class, they spend almost 20% more to eat out at fast-food and other restaurants.

In addition to eating out more, the more affluent in cities buy more luxury items from companies such as Coach and Michael Kors.

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