Feature: China reopening beneficiaries Discover the beneficiaries of China’s big reopening in 2023

Shares highlights potential winners as the country rolls back its Covid restrictions

by the National Bureau of Statistics, was much better than the 1.8% retail sales drop witnessed in December, demonstrating that the world’s number two economy is picking up.

‘REVENGE SPENDING’ EXCITES

China’s rapid retreat from its zero-Covid policy in a bid to boost economic growth is one of the big investment themes of 2023 and is sure to provide a major boon for consumption in the so-called Middle Kingdom. Since November 2022, the government has dramatically reopened the Chinese economy and rolled back pandemic-induced restrictions that had been in place for three years.

While the end of zero-Covid has created challenges for the healthcare system – major cities such as Beijing and Shanghai have seen surging Covid infections – Chinese people are travelling once again and there are signs of recovery in consumer spending as well as in travel and tourism and on leisure activities, while the reopening should also benefit oil exporters as demand for energy increases.

Admittedly, new Chinese guidance for GDP (gross domestic product) growth has checked some of the optimism over any boost from the reopening, with the new growth target announced at the National People’s Congress set at just 5% for 2023, at the bottom end of market expectations.

Nevertheless, three years of pent-up demand from 1.4 billion people is being released and the reopening, which is still in its early stages, should act as a positive catalyst for consumerfacing companies generating significant revenues in China.

Indeed, retail sales rebounded in January and February after Beijing abandoned its suffocating zero-Covid policy, reopening borders and ending mandatory quarantine. Growth of 3.5%, released

Rising affluence in China is generating fast growth in premium sectors within food, travel and cosmetics and the country’s burgeoning middle class has increasing wealth and an appetite for top tier brands. Therefore, luxury goods purveyors are pinning their hopes on Chinese ‘revenge spending’ to boost demand, driven by domestic consumption and the fanning out of well-heeled Chinese tourists to cities such as London, New York, Paris and Milan.

Stocks to watch include luxury conglomerate LVMH (LVMH:BIT), the sector goliath behind brands ranging from Dior, Tiffany and Louis Vuitton, as well as Gucci-to-Yves Saint Laurent owner Kering (KER:EPA), Swiss luxury goods group Compagnie Financière Richemont (CFR: SWX), behind the Cartier and Montblanc brands and Hermes (RMS:EPA), the French design house famed for the iconic Birkin handbag.

The reopening is also helpful for Burberry (BRBY), the trench coats-to-cashmere scarves seller which generated almost £1.28 billion of its revenues from the Asia Pacific region in the year ended 2 April 2022. That’s comfortably ahead of the £696 million of sales seen in the Americas and