It’s one of the biggest trends in the world today… the rise of the global middle class.
All over the world – especially in emerging markets in Asia – populations are earning more money. This is increasing disposable incomes and consumer spending… and improving living conditions in these countries.
We’ve talked a lot about this trend in China. But it’s also creating plenty of investment opportunities elsewhere…
The gap between developed markets and emerging markets is closing
A report by professional services firm PricewaterhouseCoopers (PwC) shows the incredible global middle-class trend happening right now.
The chart from the report (below) shows how GDP per capita (at purchasing power parity – which adjusts for price level differences across countries) is forecast to change from 2016 to 2050 for the G7 (the Group of Seven, which is a group of major developed economies) and the E7 (a group of big emerging economies).
As shown in the graph, average GDP per capita in developed markets will still be a lot higher than in emerging markets in 2050… but the gap is closing.
In 2016, U.S. GDP per capita was around four times the size of China’s and nine times the size of India’s. By 2050, U.S. GDP is expected to only be around double China’s, and just three times India’s.
And in terms of projected growth, there's no question about it. Emerging market growth is leaving developed markets in the dust. The chart below shows projected growth of GDP per capita for a range of global economies from 2016 to 2050.
As you can see, Vietnam, India and Bangladesh are projected to average an annual GDP per capita growth rate of more than 4 percent through 2050. (This growth will help them be the three fastest-growing economies through 2050.) Meanwhile, developed countries including the U.S., U.K. and Japan will all see growth of less than 2 percent.
This growth means millions of people will be joining the middle class over the next 30 years… especially in India, as well as in China.
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To everyone who thinks the Chinese middle class boom is an ‘old story’ – this is why you’re wrong
LEARN MORE HERE.
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The middle class is booming in Asia
I’ve talked a lot about how China is seeing a massive middle-class boom. Back in 2000, just 4 percent of China’s urban population was considered middle class. By 2022, that figure will be a whopping 76 percent.
In short, there are expected to be 550 million middle-class people in China. That would make China’s middle class alone big enough to be the third-most populous country in the world.
But India’s not far behind…
According to the World Economic Forum, India’s middle class could grow larger than China’s by 2027.
Think tank Brookings Institute suggests that by 2030, two-thirds of the global middle class will be living in Asia.
And all of these new middle-class consumers plan on spending more money – a lot more.
By 2030, China’s average urban per-household disposable income – the amount of income a household has after income taxes – is expected to double from about US$4,000 to US$8,000, according to consultancy McKinsey & Company.
This will push up Chinese consumption – the amount of stuff that people buy and spend money on – by 55 percent… to US$6.5 trillion by 2020. That’s an increase of US$2.3 trillion – which is like adding a new consumer market 1.3 times larger than the U.K.’s current consumer market.
Meanwhile, India’s average per-capita urban disposable income is expected to grow from around US$1,000 in 2010 to around US$3,700 in 2030.
Now US$3,700 might not sound like much if you live in the West, but this will drive a trebling of Indian consumption to US$4 trillion by 2025… making India the third-largest consumer market in absolute terms in the world – just behind the U.S. and China.
By 2030, Asia as a whole will account for nearly 60 percent of middle-class consumption. (To put that in perspective: In 2010, North America and Europe accounted for a little over 60 percent of middle-class consumption.)
Russia redux… and what this means for investors
What do people do when they suddenly get more money?
They spend more on leisure, healthcare and looking good. But one of the biggest things they spend on is travel…
There’s enormous pent-up demand for travel in places like China and India.
It’s similar to the pent-up demand that I remember seeing first-hand in Russia in the 1990s.
For decades, citizens of the former Soviet Union hadn’t been allowed to travel, except in very special circumstances.
After the end of the Soviet Union in 1991, travel restrictions were eased. But it wasn’t until the economy stabilised years later (and commodity prices rose), and people began to have more money, that international travel took off. Eventually, the then-emerging Russian middle class started to fly to European destinations on holiday – rather than to resorts in Russia and the former Soviet Union, which had been the extent of vacation options for their parents. Today, you’ll hear Russian spoken in tourist spots all over the world.
And similarly, almost anywhere in the world – from Auckland to Paris to Buenos Aires – there are a lot more Chinese and Indians than you would have seen a few years ago. These millions of new tourists are changing the global travel industry.
China is set to pass the U.S. to become the world’s largest aviation market by passengers by 2024. And Chinese air passenger traffic will double to 927 million passengers a year by 2025 (compared to the U.S.’s 904 million by 2025). By 2035, the number will hit 1.3 billion.
Meanwhile, India is predicted to become the world’s third-largest aviation market by 2032. Indian air passenger traffic is expected to increase to 500 million passengers a year over the next 10 to 15 years.
In other words, tourism in China and India is booming.
But it’s just one of the industries set to profit from a rising global middle class.
As the world’s middle class grows – along with their disposable incomes – consumers will buy things at a rate never seen before. Smart investors know that this is the type of trend that can make them life-changing amounts of money if they invest properly.
If you want to get in on this trend early, we’ve uncovered three ways to profit from the Chinese middle-class boom.
And it couldn’t be simpler to invest. Each of these investments trade on major exchanges. That means you’ll likely be able to buy them from the brokerage account you already have.
You can learn more about the massive opportunities being created by the Chinese middle class right here. (If you’re a Churchouse Letter subscriber, you should have already seen this report… if you haven’t see it yet, please visit the subscription portal here to check it out.)
