Starbucks Is Betting On China

Concerns about the Chinese economy have weighed on markets around the world for more than a year as many worry that Beijing will be unable to turn things around any time soon.

Companies like Hershey Co (NYSE: HSY) have seen its Chinese sales slide as the nation struggles to regain its footing, but coffee mogul Starbucks Corporation (NASDAQ: SBUX) is planning to go ahead with a massive Chinese expansion despite those concerns.

Bullish On China

Starbucks' Chief Executive Howard Schultz said the company's plans to open 500 new stores per year over the next five years in China makes sense because he expects China's economy to recover despite all the chatter on Wall Street. China's taste for coffee has been growing, making it an important place for Starbucks to establish a presence.

The company's latest earnings report showed that same-store sales in China and the Asia Pacific region rose by 6 percent. Schultz believes in China and he's expecting the nation to become Starbucks' largest market eventually.

While expanding into China at the moment may seem risky, the nation's transition from reliance on factories and exports to becoming a consumer-driven economy could represent a huge opportunity for a company like Starbucks.

Local Customs

Starbucks'' expansion will come with a hefty price-tag, though. The company is planning to offer full-time employees a housing allowance as is customary for lower-paying jobs. While many industrial companies build dormitories with which to house their workers, Starbucks is planning to give its qualified employees a stipend to spend on housing costs.

The decision comes as the coffee chain works to make changes to employee compensation packages around the world — the firm recently began offering U.S. workers college tuition subsidies and UK employees loans to help with housing costs.