It’s not hard to find bad news stories about China's economy.
China's stock market has plummeted 40 per cent from its peak, iron ore prices have collapsed by 75 per cent, Macau gaming revenue has halved in two years, luxury goods profit warnings abound and the yuan has been devalued.
While the quality of official gross domestic product (GDP) data is subject to debate, it is clear that the Chinese government's determination to rebalance the economy away from credit-fuelled infrastructure towards consumer consumption cannot maintain past economic growth rates.
But it is time to take a more nuanced view. The US TV pundit Jim Cramer is fond of saying, "there is always a bull market somewhere".
In an economy of 1.4bn people and a GDP in excess of $11trn, that is certainly true of China. It is time to go beyond the mindset of a simplistic gambler; investing in China is not about selecting red or black.
Looking at the fundamentals, consumption is growing quickly at 15 per cent or higher by some estimates. Nevertheless, at a relatively lowly 35 per cent of GDP, its contribution to the overall economic growth rate is masked by significant industrial weakness. By comparison, consumption in Japan (which went through its own rebalancing from 1975 onwards) is in excess of 60 per cent.
Wages are also growing at eight per cent, as demand for labour still exceeds supply; while September saw retail sales grow by 10.8 per cent.
So despite the doom and gloom, the opportunity to capture growth in consumer disposable income is better today in China than any other major economy.
Particular sectors stand out. For example, only 31 per cent of China’s population is thought to participate in sport, while in South Korea it is 56 per cent.
The Chinese government is committed to redressing this balance. Chinese consumers already watch their South Korean counterparts for fashion trends, and the latter spend seven times as much on sportswear.
Equally, Chinese cosmetics spending is $32 per capita – in Japan it is $300 and in Korea it is $195. Even when a Chinese person travels, they only spend about $70 on cosmetics in duty free, suggesting plenty of growth to come for Western brands.
China's internet economy also continues to be vibrant. 'BAT' – the big three of Baidu, Alibaba and Tencent – have a similar combined market value to Google, Facebook and Amazon and, in aggregate, are likely to generate at least as rapid sales growth in the next few years. On measures such as a multiple of forecast operating profit, they are now trading at a discount to their US peers.
In many cases, the principal risk facing consumer companies in China is not a lack of demand, but excess supply and competition. Well managed businesses with strong brands can thrive in this environment. For discerning global investors, who buy companies rather than broad indices, the opportunities are plentiful.