China’s Urban Tipping Point Boosts These Companies

China’s (NYSE:FXI) population in urban areas has exceeded that of rural areas for the first time ever. At the end of 2011, the country had 690.79 million people living in urban areas and 656.56 million in the countryside, making the population in urban areas double the total U.S. population. China’s urban population has grown significantly since Deng Xiaoping brought in capitalist reforms in the late 1970s, taking over 200 million people out of poverty and turning the country into the world’s second largest economy and its biggest consumer of steel, copper and coal.

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China’s urbanization has already benefited companies such Caterpillar Inc. (NYSE:CAT) and Komatsu Ltd., BHP Billiton Ltd. (NYSE:BHP) and Rio Tinto Plc. (NYSE:RIO). Shifting consumer tendencies and mounting wealth have also sparked demand for products from Apple Inc. (NASDAQ:AAPL), General Motors Co. (NYSE:GM) and Yum!Brands Inc. (NYSE:YUM).

Income of urban dwellers are more than triple that of its rural residents. Per capita urban disposable income grew 8.4 percent in real terms last year to 21,810 yuan. By the same measure, per capita rural cash income rose 11.4 percent to 6,977 yuan. Income growth for rural residents surpassed that of urban in 2011 for the last two years.

As the nation’s urban population expands, China now has to find a way to provide jobs, welfare and other social services to its city dwellers. Zheng Zhenzhen, a professor at the Institute of Population and Labor Economics at the Chinese Academy of Social Science, said, “One of the government’s top priorities now is to look after the lowest rungs of the urban population.”

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