Dear Fellow Investor,
Every time I visit China, I stop by my hometown, Taipei, to visit family and friends. Two weeks ago, I stopped in Taipei on the way back from Hong Kong to Los Angeles. Fortunately for me, each trip feels like a homecoming because in many ways, Taipei has not changed much over the past 10 years. Unlike Shanghai, Shenzhen and Hong Kong, where gleaming new skyscrapers pop up almost daily, many of the buildings in Taipei are older and architecturally less interesting.
The skylines of modern Chinese boomtowns are also more symmetrical than in Taipei. The Grand Hyatt Hotel in Shanghai—the tallest building in Mainland China at the moment—looks right at home next to all of the other skyscrapers around it. In contrast, Taipei is home to the tallest building in the world, the Taipei 101, but it sticks out like a massive tree standing in the midst of tiny Lego-block buildings.
While it's clear that economic growth in Taipei has lagged behind growth in Shanghai and Shenzhen in recent years, a closer look reveals that the people in Taipei are actually more prosperous than the people of those other two cities.
For example, in Taipei, it's rare to find people who haven't bathed for more than a day. But in Shanghai, because of poor access to hot water, it's common to see people who haven't bathed for a few days. Another subtle sign of prosperity is the taxi cabs in Taipei. Most cabs there are clean and well-equipped with fares that run twice as high as in Shanghai. One time in Taipei, I rode in a cab with a video monitor and a karaoke machine in the back seat. I was thoroughly impressed, and the experience highlighted the enterprising nature of the Taiwanese people.
Taiwan's Impact on the China Miracle
The Taiwanese have always been resourceful and enterprising. Taiwanese entrepreneurs and businesses have actually been on the leading edge of the China Miracle. Businesses controlled by Taiwanese entrepreneurs account for nearly 20% of China's total exports. Because these entrepreneurs have capital and expertise, they have had a head start in participating in and profiting from China's growth, and many have amassed immense fortunes as a result.
Taiwanese entrepreneurs were the first foreign investors to enter Mainland China back in the 1980s and early 1990s. There are dozens of Taiwanese businesses that started in China with less than $5 million in the '80s and '90s that are worth more than $100 million today.
Taiwanese companies in particular have been leading the charge in information technology manufacturing in Mainland China. One of the companies in our China Strategy portfolio is the world's leading contract manufacturer of semiconductors. Its headquarters is in Taiwan, but many of its operations are in China.
Last fall when I visited China, I made a special stop at this semiconductor company's headquarters. While there, I met with the company's director of institutional investor relations, Dr. Elizabeth Sun. Dr. Sun is the winner of numerous awards for being the best investor relations officer in Asia. She is highly respected amongst global technology industry analysts and fund managers.
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By the end of our two-hour meeting, I could see why she has a reputation of being the number-one investor relations officer in Asia. Although she received her doctorate in finance, Dr. Sun has thorough knowledge of the technology side of the business. She was a professor at San Jose University before she entered the business world, and it showed. She was engaging, informative and very dynamic.
My investing tour group and I were all deeply impressed by her, and when we left, one member of our group remarked, "That lady is a walking think tank." I agree, but most importantly, our meeting confirmed my belief that the company is led by superb management and has a bright future.
As soon as I got back from my trip, I recommended the semiconductor company to China Strategy subscribers. Click here to get immediate details on this company as well as my recommended buy limit. I expect this tech giant to continue benefiting from strong management and its low-cost manufacturing operations in Mainland China.
Moving Towards Peace—and Increased Prosperity
Taiwan might be prosperous and enterprising, but it faces a major obstacle. The current administration has made a political decision to isolate itself from Mainland China—and the incredible economic growth there. Despite the administration's anti-China stance, millions of Taiwanese still visit China each year, with more than one million Taiwanese now spending more time in Mainland China than in Taiwan.
And for the first time in more than a decade, successful Taiwanese entrepreneurs in China are sending their huge profits back home to Taiwan. This repatriation of money into Taiwan has been driving both real estate and stocks on the island higher.
At China Strategy, we're taking advantage of this situation. We're invested in an exchange-traded fund (or ETF) that's profiting from Taiwan's recent boom. This ETF lets us play the entire Taiwanese market at once. So far, our position in the ETF has gained 26%, and I believe there are more profits where that came from.
Taiwan's prosperity will continue—and likely increase—for one major reason. The island's current president, Chen Sui-bien, who is notoriously anti-China, will leave office next spring. Both of the leading candidates to succeed Chen are more pragmatic than him and will make it easier for Taiwanese businesses to operate in Mainland China. As a result, it will become easier for Taiwan to ride the coattails of the China Miracle.
Once the political hurdles are out of the way, which will likely happen next year, Taiwanese companies will be in an even better position to profit from China's incredible growth. You can become a part of this growth by subscribing to China Strategy today. Click here to learn more, and you'll get instant access to the name of our semiconductor company and our Taiwan ETF. But you must act quickly and establish positions before next spring, or else you might miss out on Taiwan's upcoming rally!
