Technology in China Makes a Good Bet

Technology is clearly all the rage in China. Just take a look at the mobile phone market in China with about 461 million mobile phone subscribers in 2006, up a whopping 578% year-over-year (yoy) or 378 million additional users from 68 million in 2005. These are excellent growth metrics. In 2006, sales of mobile phones in China surged 40% yoy to 120 million units versus 25% global growth, according to the China Mobile Communications Association.

Estimates call for growth to slow in 2007 but still come in at an impressive 25% yoy to 150 million units, above the projected global growth rate of 20%. For this reason, you need to be looking at companies such as China Mobile Limited (NYSE/CHL), Qualcomm Inc. (NASDAQ/QCOM), Research In Motion Ltd. (NASDAQ/RIMM), Kongzhong Corp. (NASDAQ/KONG), and Comtech Group Inc. (NASDAQ/COGO).

The Internet sector is also on fire in China. With Internet access and broadband technology growing, the number of Chinese Internet users just hit the 137 million mark in 2006, up 11.38% yoy, according to the China Internet Network Information Center (CNNIC). China’s Internet numbers are second only to the U.S. Rising online spending has helped to fuel the gains.

What is also interesting is the strong growth of the broadband industry in China where 66.20% or 90.7 million of the total Internet users accessed the Internet via broadband. Growth in broadband was 17% in 2006. Another 17 million or 12.40% of the total Internet users accessed via wireless hubs. The potential Internet market in China is enormous as the current penetration rate is a mere 10.5% of the country’s 1.4 billion people.

The strong growth in broadband access is also creating a massive online gaming market. Companies that you should look at in this area include The9 Ltd. (NASDAQ/NCTY) and Webzen Inc. (NASDAQ/WZEN).

This news should not be a surprise to you. We have all read and heard about the extraordinary economic growth in China. It will not only be limited to technology. As Chinese citizens see their incomes rise, the demand for consumer goods and services will rise along with it.

Every investor should have some capital allocated to Chinese investments either in U.S. companies with exposure in China, American Depository Receipts (ADR), mutual funds, or Exchange- Traded Funds (ETFs).

The reality is the country is growing in all facets, whether technology, industrial, or natural resources. The trend is positive, and you need to be there.