The shock wave from the shift in China's economy is being felt around the world. The shift has only just begun but already China is the number one market for a range of expensive luxury items. Growth in spending by China’s middle class has the potential not only to transform China’s economy, placing it on a more sustainable path for the future, but also to rebalance the global economy.
Recent volatility in China’s stock market, uncertainty about the RMB’s outlook, and downward revisions to China’s growth forecasts all appear to cast doubt on this positive vision for China’s future. However, in our view, these developments are consistent with the first painful steps towards a more open economy, which is a fundamental prerequisite for a rise in Chinese consumption.
More specifically, the Chinese government is rightly focusing on reforms to pension and medical