The China market is closed for the Spring Festival holidays so we continue to explore the elements of the country’s 14th Five-Year Plan and how this impacts business and future business opportunities. The most recent Five-Year Plan covered eight areas and this week we consider two more of these.
The fourth element of the Five-Year Plan is to raise urban residents to 65% of the population. The first thought is that urban residents will have access to better-paying jobs that lead to an expansion of disposable income which is good for a wide range of consumer goods and services. That is certainly true but it offers businesses no more than a continuation of existing opportunity paths in China.
However, the policy change means that only 35% of the population will live in the countryside and, by implication, an even smaller percentage will be involved in agriculture. This smaller percentage of the population would be responsible for growing the food required by 65% of the population.
Changing face of Chinese agriculture
China’s agriculture and agricultural methods must, therefore, undergo a major revamp. This accelerated depopulation of the countryside can only be compensated by a growth in technological solutions. That means better land management, improved production and possibly significant changes in property ownership as rural areas move to broadacre cropping and better livestock management in remote grasslands.
There is a range of business opportunities here. First is the direct involvement with the development and provision of technology solutions for high-intensity agriculture in areas that traditionally have not used these methods. These include better environmental management to derive optimum usage of land assets. For instance, this may include the application of fertilisers in specific areas based on satellite and drone analysis rather than a generalised spread across the property.
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The expanded use of technology-based environmental management systems is not to measure land degradation but to measure optimum land utilisation in agricultural production, which opens new business opportunities.
The second opportunity comes through co-operation with external parties. The grasslands of Mongolia and deserts of Xinjiang have their equivalents in Australia. Fifty years ago, the vast landholdings in Northern Australia faced the same problems of diminishing labour force that China is facing in these remote regions. The Australian pastoral industry developed low labour force solutions and improved pastoral land management practices. Business partnerships with these groups to deliver strategic and training solutions is just one of the new business areas that open as China shifts towards a 65% urbanisation target.
Aim to increase life expectancy
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The fifth element of the plan is to increase the life expectancy of Chinese citizens by one year. Again, there are two aspects of this objective. The first is how you achieve increased longevity. It is a combination of reducing infant mortality, improving living conditions including environmental factors, and providing better health services that counter preventable diseases.
Unpacking the business and investment opportunities in each of these areas is like opening a Pandora’s box. The primary focus is on the opportunities offered by environmental improvements, particularly about air and water quality. These are well-known areas of existing investment and cooperation, which are also related to the sixth objective which is to promote green development. However, the reversal of environmental degradation is a task with different challenges.
You do not need to travel far into the countryside beyond the cities to see the ways that living conditions can be improved. There are ample opportunities to involve businesses and investors in these physical and service delivery projects. Lifting people out of absolute poverty is just the first step in moving towards common prosperity and moderately prosperous society.
The second consequence of increasing longevity by a year is the expansion of services for senior citizens. Again, there are two aspects here. Gone are the days when people were worn out and exhausted and in the early stages of chronic illness when they reach 65 years of age. We might say that these conditions have been largely shifted towards those in their mid 70’s.
This means there is a substantially increased “silver” sector service economy with demands for tourism, appropriate activities, social engagement and lifestyle choices. Just like the expansion of “silver” services we already see in Singapore, the same will soon take place in China. This group of “silvers” were once youths of the Cultural Revolution and the famine years. After a working life in what was often arduous conditions, they have become have now become retirees with the money, energy and desire to reward themselves after a working life in what was often arduous conditions.
The third consequence of increasing longevity means more people will look for aged care and the demand for hospital services to manage conditions associated with old age will only rise.
Aged care living communities are an investment growth area. These are generations who are not supported by numerous children who can offer support. Instead, that support must be offered by a coordinated societal response that delivers appropriate aged care facilities and services. Again, these are growth areas where Singapore and other developed nations have experience and can be drawn upon.
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Aged care providers may think it is easy to expand their operations in China but the challenge is to provide services and facilities in a culturally appropriate fashion. What is acceptable in an Australian aged care home may not be directly transferable to an aged care facility in China. Investors will need to be careful in assessing the ability of outside providers to develop appropriate solutions.
The 14th Five-Year Plan has eight elements. We have considered five of these, assessed their impact on existing businesses and investments, and also identified new and expanding opportunities that flow from the planning. Next, we look at the green development, the Belt and Road Initiative, and building peaceful elements of the Five-Year Plan.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a national board member of the Australia China Business Council. The writer owns China stock and index ETFs
Photo: Bloomberg
