While Covid-19 caused a short-term shock to the Chinese economy, the government’s quick and comprehensive mobilisation at the start of the pandemic meant that the impact to consumption and business confidence has been largely cyclical and not structural. While some industries are still seeing some short-term pain as a result of the pandemic, overall we are finding that activity levels on the supply side of the economy have recovered more quickly than on the demand side, although both are showing some encouraging signs. 
As with many economies, the outbreak has accelerated certain structural trends in China that were already underway. We continue to find the most attractive opportunities in technology, consumption, and healthcare – these are sectors that are capitalising on the transition of the country to a more consumer-driven economy.
Driving this shift in consumption patterns is the country’s growing millennial population, which, at present, stands at around 400 million – more than the combined working population of Europe. This has had a profound impact on the technology and e-commerce sectors, which in return has helped China become the world's number one retail market.
Technology
Technology continues to offer huge potential over the long-term in China. Millennials are more tech-savvy than their previous generations, with over 90 per cent of this population having access to a smartphone. In addition to this, although working from home has been a necessity recently, we believe it will become more prevalent in general, driving demand for online and cloud services.
One of the companies benefiting from this environment is Bilibili, a Chinese video-sharing platform themed around animation, comics and games. It is a prime example of a ‘new china’ company that is profiting from the changing consumption patterns of a new generation. Highlighting the exceptional levels of daily user activity on its platform, Bilibili reported total net revenues of $260.1m last year.
Consumer discretionary
As Chinese millennials continue to seek various services at their fingertips, the growth opportunities in the consumer discretionary sector looks highly compelling. Meituan Dianping – the Chinese equivalent of Deliveroo – is a prime example of a multi-level technology service platform witnessing accelerated growth in its user base and the pandemic is further reinforcing this business model. The company, whose unique selling point is its ability to have fresh food delivered in 30 minutes within a 3km radius, is the country’s leading website for locally found food delivery services, consumer products and retail services. Since the beginning of the pandemic, merchants have accelerated their migration to online distributors such as Meituan, particularly branded restaurants with high-quality supply, which have traditionally focused on in-store dining instead of delivery services.
Healthcare
Even before the outbreak of Covid-19, China lacked adequately widespread diagnostics and healthcare facilities, and had shortages of broad-based vaccinations for illnesses such as the regular flu. As consumer expectations continue to rise, a focus on improving healthcare spending in China remains a clear structural trend for investors, especially in areas like outsourced clinical testing, diagnostics and vaccinations. The coronavirus pandemic has hastened demand for these services in the short term and will likely increase penetration rates over the longer term.
We are also seeing increasing domestic innovation in Chinese healthcare. For example, the pandemic has also shone a light on under-investment in hospitals where intensive care unit beds are just 5 per cent of hospital beds vs 15 per cent-plus in developed markets. This provides structural growth for companies such as Shenzhen Mindray which manufactures medical equipment and is increasingly successful in export markets given its focus on R&D.
When looking at China, investors should continue focusing on the long-term and the inherent growth prospects of this burgeoning economy. In the short-term, we are likely to also see better performance from some pro-cyclical, stimulus-sensitive stocks. While we cannot fully anticipate the long-term impact of the pandemic on the Chinese economy, as we continue to monitor the situation, we remain confident that the outlook for structural growth in Chinese markets remains appealing for investors focused on the long term.
Rebecca Jiang is co-manager of the JPMorgan China Growth & Income Trust. The views expressed above are his own and should not be taken as investment advice.