On the ground in Xiamen, Musings from the Airport – day 5

As I checked in for my flight home at Xiamen Gaoqi Airport, I took a moment to look around.

The domestic check-in counters were, as usual, packed to the brim — but this time, the international terminal was buzzing too. It’s a small but telling sign: while domestic travel in China continues to grow, international travel is finally staging a comeback. Chinese consumers are gradually finding their footing again — not in a dramatic rebound, but in a steady, determined climb.

Anecdotes from one week in just two cities can’t capture the full picture of China. But when layered on top of what we’ve seen in past years, they offer a useful lens into the longer-term trends shaping the country and the economy. As we reflect on our time in Shenzhen and Xiamen, slightly sunburnt and more than slightly overheated, a few themes stood out:

• Tariffs were front and center in every meeting — but what surprised us was how well-prepared companies were. From Luxshare to Shenzhen KTC, firms have already shifted supply chains to Southeast Asia or redirected growth away from the U.S. entirely. The consensus destination? Southeast Asia. The companies all claimed that they have figured out various ways to minimize the tariff impact, if not get exempted altogether.  What we didn’t hear — not once — was any plan to build capacity in the U.S.
• Many Chinese companies now look and operate like true multinationals. Take Zijin Mining, which today employs more non-Chinese than Chinese workers across its global operations from Latin America to Africa and China. It’s not hard to imagine a future where China’s stock exchanges are home to the world’s most dominant emerging market multinationals.

• Domestic competition remains fierce, with supply often outpacing demand. But that’s also what drives relentless innovation and efficiency, the only way for businesses to survive in China. Whether it’s smarter cooling systems or more affordable autonomous vehicles, this pressure cooker of competition is producing better products and lower prices — and consumers, both in China and abroad, are reaping the benefits.

• And while we didn’t dwell on it this trip, the mega-trends from past years are still very much alive. Automation continues to replace labor — from robot arms on factory floors to Meituan drones and hotel delivery bots. Meanwhile, domestic substitution marches on, whether it’s Luckin coffee over Starbucks or Ningxia Pinot (surprisingly tasty!) over imported wine.

That’s a wrap for this year’s grassroots China research trip!

Until next year…
Best,
John Lin
Chief Investment Officer – China Equities
AllianceBernstein

Click here to read about Day 4.

The views expressed / information contained here may change at any time after the date of this email. This email is provided by AllianceBernstein Australia Limited (ABN 53 095 022 718 AFSL 230 698) (“ABAL”). This email does not constitute “personal advice,” as defined in the Corporations Act 2001. This email content has been provided to you for use in a private and in confidence to discuss a potential or existing investment advisory relationship. This email is not an advertisement, is not intended for retail or public use or distribution beyond our private meeting and must be returned to us immediately upon demand.

References to specific securities are presented to illustrate the application of our investment philosophy and portfolio construction process and are not to be considered recommendations by ABAL. The specific securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.  The views of any specific securities identified and described in this document are those of a specific portfolio management team and portfolio strategy at a point in time and which may differ from the views of other portfolio managers managing other strategies.

No reproduction of the materials in this email may be made without the express written permission of ABAL. This information is provided for persons in Australia only and is not being provided for the use of any person who is in any other country.

For wholesale use only. Not for inspection by, distribution or quotation to, the general public.