It’s no secret that China is already starting to dominate the world economy.
Understanding the country, its culture, and its economic infrastructure, however, is a daunting task, particularly for outsiders. Official reports and media accounts are hardly worth basing an investment opinion on– it’s critical to have boots on the ground.
I have spent a fair amount of time in the country and built up a list of valuable contacts who live and work there. One of them is an old friend of mine, a really gutsy lady who moved to Shanghai on her own to seize a piece of the opportunity several years ago.
Christine Verone has a strong finance background having worked for a variety of funds and brokerage houses in Chicago, Switzerland, Singapore, and China. She is proficient in Mandarin and has become a ‘go-to’ person in Shanghai, particularly from growing businesses that want to interface with the west.
I’ve been at her for months to do a bit of writing for me– she is a phenomenal analyst and understands the complexities of Asian markets, including Shanghai, Hong Kong, and Singapore.
Her most recent letter to me was quite interesting:
Sorry this is late… I was actually in the hospital! On the bright side – I do see a lot of opportunity in the medical sector here and got a great first-hand perspective of the Chinese healthcare system.
Here’s what’s interesting– you know how the western media says Chinese save 40% of their income? It’s true… but they aren’t buying TV’s, Rolex watches, and cars that they don’t need.
Chinese are saving up in case they get sick– at hospitals, any Chinese person that can afford it goes the VIP section and receives the best medical treatment that money can buy. They prioritize healthcare over mindless consumption and commit to saving for it.
It is also worth noting that there are skyrocketing rates in diabetes, cardiac problems, and cancer in China… all of this thanks to poor food quality, pollution, and cultural changes.
You know how Americans became obese over the span of 60 long years post World War II? All those chemical and sugar-infused snacks were absorbed over a span of two to three generations. China has compressed 60 years of dietary shift into a single decade.
In fact, many Chinese people even think it’s prestigious and “cool” to have chubby children. The cartoon characters that brand soy and dairy products here have fat kids on them. This is attractive to parents. Crazy, I know.
The concept was further driven home to me last week when I was in an antique store in search of a copy Mao’s Little Red Book (the most printed book in the history of world, next to the Bible).
Anyway, I was looking at old Chinese postcards and stamps from the 50’s — and they depict fat smiling babies in vegetable patches. That was the dream. Everyone was starving.
Today as the average Chinese enjoys a rapidly increasing standard of living, this fat baby dream is finally being realized. The end result? a diabetes epidemic.
Don’t get me wrong, I’m not saying the “majority” of Chinese people are fat by any means. But the diabetes growth rate is truly alarming… and to be honest, it translates into major opportunities for certain pharmaceutical and medical companies.
The concept is similar to your friend Dr. Huang’s FDA strategy, but instead of FDA approval in China, you are looking for government support and policy action.
Naturally, there are only a handful of government-approved firms that are positioned to profit from each epidemic. Foreign firms don’t have access. If they do, you know about it months in advance– no one is sneaking in.
The major risk you need to look out for? Can the product (drug) be copied…is it easy to copy? Will the government ensure that it will not be copied? This is important because the instant that a drug is copied, the company loses market share dramatically.
The companies that are best positioned to profit from Chinese epidemics are easy to spot and they can be just as explosive as Huang’s biotech approvals. On top of that, the government ensures that Chinese companies have limited (or zero) competition.
I’ve got to run for now but will send you some listed companies including China’s tylenol company, and another that makes prenatal supplements (huge growth industry here). Both are traded on US exchanges.
Simon again. These are really valuable insights, and I’m eagerly anticipating her follow-up email so I can rip apart the balance sheets of these Chinese companies.
I’m fortunate that Christine knows these markets and major players so well, and having worked in Zurich’s secretive wealth management industry, she also knows Singapore structures inside-out. In fact, I’ve even got her working on the Asia portion of our forthcoming Second Passport book.
Let me know what you think of her boots on the ground insights and if you’d like to hear more.
