Some enticing stock ideas for investors searching the globe for growth

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Capitalists everywhere will be watching this week's meeting of the Chinese Communist Party for clues about where they should be putting their money next.

While most of the action at the once-every-five-years congress of senior party officials will take place behind firmly locked doors, previous conclaves have offered intriguing hints about what lies ahead for the world's second-largest economy.

The 2017 edition, which begins on Wednesday, is nearly certain to demonstrate the growing clout of China's President, Xi Jinping. He is already regarded as the most powerful Chinese leader in decades and he is widely expected to consolidate his power by placing even more of his loyalists in key positions.

His tightening grip on authority doesn't bode well for openness or democracy, but the President's increasing power could have its positive side if it enables Beijing to push ahead with a much-needed shift toward a more consumer-oriented economy.

Over the past decade, China has relied upon infrastructure spending and massive increases in borrowing to fuel its expansion, but that strategy is hitting its limits.

The International Monetary Fund warned the country in August that it is amassing dangerous levels of debt. Assuming current trends continue, China's non-financial sector debt will swell to almost 300 per cent of the country's gross domestic product by 2022, roughly twice the level that prevailed when the financial crisis hit in 2008, according to IMF calculations. "This raises concerns for a possible sharp decline in growth in the medium term," the international agency admonished.

But despite the stark tone of that warning, the IMF report contains some welcome thoughts for investors. To wean the country from its addiction to debt-fuelled heavy industry, the IMF recommends encouraging household consumption – a strategy that Beijing already appears to be backing. If the transition to a more consumer-oriented economy takes place as planned, many of the companies that cater to the country's growing middle-class population are in a position to prosper.

To be sure, investors should expect volatility, cautions Geoffrey Wong, head of the Asia Pacific and emerging-markets equities team at UBS. But he believes that buyers who focus on new-economy, consumer-oriented stocks will find some enticing opportunities.

Some of his favourite names include two companies focused on education: New Oriental Education and Technology Inc. and TAL Education Group. Both companies trade on the New York Stock Exchange and both use advanced technology to offer a variety of courses to students in China.

"For households in China, education is a vital good," Mr. Wong said. "The saying is that it's the third-most-important thing, just after food and a roof over your head. So we think these companies are well positioned."

He also likes Ping An Insurance Co. of China Ltd. It offers health insurance and other products that have particular appeal to citizens in a country without much of a social safety net. The company's shares trade primarily in Shanghai and Hong Kong, but are also available in the form of American Depositary Receipts in the United States' over-the-counter market.

Like Mr. Wong, other analysts also see a lot to like in China's rapidly maturing consumer market. The country's homegrown online giants, which cater to the country's growing penchant for consumption, come in for particularly lavish praise.

The so-called BAT stocks – Baidu, Alibaba and Tencent – have already chalked up enormous gains for early investors.

Baidu Inc., an online search business, has soared more than twenty times since listing on the Nasdaq in 2005.

Alibaba Group Holding Ltd., an e-commerce titan, has more than doubled since its debut on the New York Stock Exchange in 2014.

Meanwhile, Tencent Holdings Ltd. has climbed 600 per cent in U.S.-dollar terms over the past five years. Shares in the diversified company, best known for its mobile messaging app WeChat, trade primarily in Hong Kong, but are also available in the form of American Depositary Receipts.

Should you ride any of these emerging Chinese stars? The knock on China's leading consumer companies, however you define them, is that they are expensive in terms of just about every standard investing metric. Many also suffer from dubious corporate governance.

All that is true and offers a good reason to bide your time. But in a world where China's economic muscle keeps on growing, smart investors should keep a close eye on the country's emerging consumer revolution.