— "Ahead of the Street" Column, by Mitchell Clark, B. Comm.

The invasion force is now here, but there are no troops to be seen. In what is a continuing story of outsourcing in the manufacturing sector, China Automotive Systems, Inc. (NASDAQ/CAAS) just announced a landmark supply agreement with its first global OEM customer — Chrysler Group. Back in November 2008, China Automotive got its first contract from Chrysler to export power steering gears for North American assembly plants. Since the middle of last year, these steering gears have been exported from China to the United States and installed in most “Jeep Wranglers.”

Not surprisingly, China Automotive is quoted to be “...very excited about our strengthening relationship with Chrysler and the deep potential for the vast North American OEM market.” The company is now producing electric power steering units and is selling about 2,000 units a month to Suzuki Auto Ltd. in China. There is a trend towards electric power steering from the previous hydraulic technology and there's no doubt that we'll soon see China Automotive's electric power steering units installed in more domestic vehicles. Electric power steering is lighter than hydraulic units and therefore adds to fuel economy.

While domestic auto suppliers struggle operationally, companies like China Automotive are flourishing, hiring workers, engineers and designers. The company's stock price has more than quintupled over the last 12 months and, even at its current level, is still reasonably priced considering the company's anticipated growth prospects.

The automobile industry has really changed, just in the last 10 years. “Government Motors” now sells more vehicles in China than they do in the U.S. market. There's actually quite a bit of hope in the industry as global sales have been quite strong and the new products hitting the marketplace just keep getting better and better.

Like in many industries, the economic recovery is accentuated in countries like China, which is slowly transitioning itself to a domestic consumer of goods from a pure-play exporter.

My favorite investment analyst, Jim Rogers, feels that the Chinese real estate market is in a little bit of a bubble, but he won't sell China. In fact, real industry is doing just fine. There's just too much price inflation in real estate, because individuals are getting much wealthier and want to buy cars and homes.

It's quite amazing that a domestic industry here can be struggling, yet the same undeveloped industry in China is booming. It's still a Wild West economy over there, but I wouldn't exclude it from my portfolio under any circumstances.