Chinese economy’s rapid ascent from 1.2 Trillion(in 2000) to 17 Trillions(in 2025) has created a large number of millionaires and giant profit-spitting companies. The lessons from this growth spurt holds significant importance for emerging market investors, especially India, as it trails behind China. During this period, the sectors that have grown most in China are:
1. Financial services: The sheer scale of China’s economic expansion necessitated a corresponding growth in its financial system. State-owned banks, in particular, became gargantuan entities, facilitating massive investment in infrastructure, manufacturing, and real estate. The assets on their balance sheets grew by orders of magnitude as they provided the credit lifeline to the booming economy. The largest Chinese banks are now among the largest in the world by assets. Companies like Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Agricultural Bank of China (ABC), Bank of China (BOC) but returns in this sectors have been relatively lower.
2. E-commerce and Internet technology: This sector essentially started from scratch or very small beginnings 30 years ago and exploded into a multi-trillion dollar industry. Companies like Alibaba and Tencent built vast digital ecosystems, acquiring massive user bases, expanding into diverse services (payments, cloud, logistics, gaming), and accumulating significant assets (data centers, intellectual property, investments in other companies). Their growth was driven by the rapid adoption of the internet and mobile technology by a massive population. Examples of companies (highly probable for >5x growth, likely much more): Alibaba Group, Tencent Holdings, JD.com, Baidu.
3. Infra and construction: China’s “build, build, build” approach to development led to unprecedented investments in physical infrastructure. Companies involved in building roads, railways, airports, ports, and urban centers would have seen their order books swell and their asset bases (equipment, land for projects, completed projects before handover) expand dramatically. The sheer volume of projects undertaken by state-owned enterprises in this sector is astounding. Examples of companies (likely candidates for >5x growth): China State Construction Engineering (CSCEC), China Railway Group (CREC), China Communications Construction Company (CCCC).
4. Real estate: Urbanization, rising incomes, and speculative investment drove property values and development activity sky-high. Real estate developers accumulated vast land banks, properties under development, and completed assets, leading to exponential balance sheet growth.
In India the mobile phone network and internet operators companies are the daily necessity for technology companies to thrive and data availability has become a oligopoly of 2-3 firms controlling the internet highway. Bharti Airtel and Reliance Jio have turned out to be clear champions in this race for internet Service providers. User base of billion Indians and rising ARPU(Avg. Revenue Per User) gives a long runway and investment opportunity for Investors.
China used more cement in 3 years then the USA used in entire 20th century. Two cement companies in India, Ultratech cement and Ambuja cement have 35% market share of Indian cement market. Cement being the Key raw material for all construction project would be required in large quantities and companies having low cost and good brand recall will be poised to make great returns.
Going forward the boom in Indian economy will provide many opportunities to retail investors to make money but only if they own the right stocks for the right time period. We will analyze both these sectors in detail in the next series of articles.