The Three Best Ways to Play the Chinese Market

China is still one of the fastest growing markets in the world; here are three of the safest ways to play it.

Apr 17, 2014 at 10:43AM

If you don't want to invest directly in Chinese companies, you can still gain access to one of the fastest-growing economies in the world. The best way to do this is to invest in U.S. companies with exposure to the Chinese economy.

The three companies below all have exposure to China but still have strong footings in the U.S.. All three of them have opportunities to grow their businesses in China along with heavy diversification in other markets. This contrasts with other companies, such as Mead Johnson, which gets over 30% of its revenue from China. 

Finding value among consumer products
It's no surprise that the largest consumer products company in the world, Procter & Gamble (NYSE:PG), has a presence in China. Its products have impressive breadth and reach. It has 25 brands that each bring in more than a billion in sales annually.

Back in 2013, Millward Brown, the brand research company, found that P&G had three of the top five brands in China: Pampers, Olay, and Crest. The other two brands in the top five included Yum! Brands' KFC and Colgate of Colgate-Palmolive. P&G already has quite an impressive presence in the country. And although P&G doesn't break out its revenue from China, the revenue that P&G is getting from developing countries grown from 35% (of total revenues) in 2011 to 40% in its last fiscal year. 

A company has big opportunities to streamline its production and product roll-out in markets abroad, such as that of China, by localizing its production. This should help the company boost its margins via supply chain efficiencies.

A high-end accessory play
Coach (NYSE:COH) is another major company that is looking to China for growth. Only about 30% of its revenue comes from outside of North America. Coach has focused on building its Americas portfolio and it has done a great job of it. It has a very recognizable brand when it comes to high-end handbags. 

For 2014, Coach plans to open 15 stores in North America and 30 in China as it expands its strong brand into the faster-growing Chinese market. This comes after it opened only 10 stores in China last year. Its store count in China currently makes up about 25% of its total store base.

Coach is also focusing more on the men's accessory market. That's a big positive considering how much men spend on luxury items in China. In China the men's market makes up 55% of luxury-goods spending, while the global average is closer to 40%.

It's tough to go wrong with athletics
Nike (NYSE:NKE) is a leader when it comes to athletic apparel and footwear. And athletic apparel is gaining traction, where individuals are living a more active lifestyle. . The problem is that this is really only true for the U.S. Nike still has a large opportunity to capture market share in China. It generates just around 10% of its revenue from China. However, it does remain the leader in the country--it owns some 12% of the Chinese sportswear market, versus adidas' 11%.

Nike is making an effort to become more of a direct-to-consumer company. This includes its decision to open a store in Shanghai. The Nike in China story going forward should be about increasing the company's brand awareness. Along those lines it's partnering with governments and universities in China to support running clubs. 

The other nice thing about Nike is that it continues to have a strong balance sheet, with a debt-to-equity ratio of only 11%. Its return on equity is fairly high at 25%. Compare that to adidas' 25% debt-to-equity and its 15% return on equity. 

Bottom line
The fact remains that China's economic growth is expected to remain well above the U.S. for the next couple of years. But when investing in China, investors should find a company with a strong brand and geographical diversification. For investors looking to increase their exposure to China, the three stocks above are great places to start.

The biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends Coach, Nike, and Procter & Gamble. The Motley Fool owns shares of Coach and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers