Say what you will about President Donald Trump – he’s certainly been consistent on China.

During the 2016 campaign, he repeatedly promised to slash our trade deficit with the world’s most populous nation. Last week, he said the goal is to cut that $375 billion yearly shortfall by as much as $100 billion.

This explains three moves he has made recently…

  • The first are the president’s 25% tariffs on imported steel, most of which comes from China. We went over those a couple of weeks ago.
  • The second occurred earlier this month when the White House blocked Singapore-based Broadcom Ltd. (Nasdaq: AVGO)‘s proposed $117 billion acquisition of Qualcomm Inc. (Nasdaq: QCOM), the wireless chip leader based in San Diego.
  • Then, late last week, President Trump signed an executive memorandum that would impose retaliatory tariffs on up to $60 billion in Chinese imports to punish Beijing for stealing American companies’ intellectual property.

These three big moves have many on Wall Street doubting the wisdom of investing in any Chinese tech stocks in the current climate.

That’s crazy.

First off, all the media “noise” around tariffs and trade wars doesn’t match the reality of the situation… the “signal” – which is that Trump’s tough talk has gotten China and others to the negotiating table.

We’ve already gotten concessions from South Korea – and I bet Beijing will be close behind.

So, while others flee in fear, I’ve identified five Chinese tech leaders that I think will benefit – not despite Trump’s moves… but because of them.

Today I’m going to show you why the time to act is now and how you can make big money doing so…

The World’s Largest – and Pulling Away

China’s e-commerce sector, which surpassed our own to become the world’s largest in 2013, now accounts for more than $1 trillion in yearly sales, according to eMarketer. That’s nearly twice as large as the U.S. e-commerce market.

And that booming e-commerce market will continue to grow – eMarketer predicts it will more than double to $2.66 trillion by 2021.

Of course, the rapid growth in smartphone use is a key factor. There are now 663 million of these e-commerce enabling devices in China, says Statista.com. Currently 46.8% of Chinese people shop online, and Statista says that 67% of those folks will be by 2022.

And mobile-based spending now accounts for half of all of China’s e-commerce, says eMarketer. That compares to just 22% here in the United States.

Moreover, we can’t ignore the fact that the world economy is shifting, with the nexus of global trade moving from the United States to China. Back in 1985 – when the global economy was worth $19 trillion in “real” terms – North America, Western Europe, and Japan accounted for two-thirds of all global growth. Back then, China and the rest of Asia accounted for 18%.

This scenario has totally reversed. Now, two-thirds of “real GDP” ($114 trillion) is due to China and Asia – while the former Big Three account for 29% of what the world produces.

This growth in e-commerce is coming as China shifts away from its focus on exports and places a greater emphasis on domestic spending. In other words, China’s government is pulling out the stops to make its economy grow internally.

That’s a savvy move for two big reasons:

  • It helps make sure that Chinese firms swing for the fences.
  • Firms operating mostly domestically will be immune from tariffs.

That’s all great news for these Chinese e-commerce profit plays that are tapping the lucrative convergence of mobile, cloud computing, and e-commerce.

All five have solid potential to double in value over the next three years.

Take a look…

Chinese E-Commerce Profit Play No. 1: The King of Social Video

Momo Inc. (Nasdaq ADR: MOMO), a leading social networking firm, perfectly illustrates the convergence of live broadcasting and social media.

Right now, it’s the globe’s third-largest social media platform in terms of monthly active users – and the live broadcasting part of business is the driver behind that success. Of the three social media leaders, Momo users spend the highest amount of time watching live video feeds.

No wonder sales have shot up from $134 million in 2015 to more than $1.3 billion in 2017. By next year, Momo stands to bring in $2.4 billion in sales. That’s a stunning 105% yearly growth rate.

To keep growth rates on the leading edge, Momo has begun to make some savvy tuck-in acquisitions.

Last month, the firm bought Tantan, a leading dating app in China. The typical user is just 22 years old, meaning Momo can grow with them as they evolve through the social media life cycles.

Chinese E-Commerce Profit Play No. 2: The Conversation Starter

Social media firm Weibo Corp. (Nasdaq ADR: WB) has built a massive user base of 376 million with an innovative twist. Any user can follow any other user and add comments to a feed while reposting. That has turned the Weibo platform into the world’s top live conversation stream.

Weibo is more of an entertainment site than mere social media platform. More than half of users say that they use Weibo to hear from China’s top stars, many of whom post daily articles that build multiple conversation threads.

To boost sales, Weibo has learned how to smartly offer trendy goods for sale. Right now, the site has 15,000 fashion icons, pushing their favorite designs on e-commerce sites hosted on Weibo.

That payoff has been impressive. Sales have shot up from $478 million in 2015 to $1.15 billion last year. And look for sales to more than double again by next year, to around $2.6 billion. Adjusted earnings should surge 150% by next year (compared to 2017 profits) to around $1.14 billion.

Chinese E-Commerce Profit Play No. 3: The Google of China

Baidu Inc.’s (Nasdaq: BIDU) highly profitable search engine accounts for 90% of China’s online search advertising market and is often the first page to be launched when Chinese consumers go online.

Even as Baidu continues to squeeze massive profits out of that core search platform, the firm has been smartly investing in a range of new growth areas.

This past November, at its annual Baidu World technology conference, the firm laid out its plans to play a key role in the Chinese market for intelligent vehicles, smart-home devices, and artificial intelligence (AI) technologies, with a strong focus on image and voice recognition.

Of course, Baidu can afford to make such heavy investments as its adjusted earnings now surpass $3 billion per year, adding to Baidu’s existing $18.8 billion cash pile.

Chinese E-Commerce Profit Play No. 4: Way Beyond E-Commerce

Alibaba Group Holding Ltd. (Nasdaq: BABA) runs the largest consumer online retail sites (Taobao, TMall) in China. And its core Alibaba.com site, along with 1688.com, are among the leading business-focused e-commerce sites.

Like Amazon.com Inc. (Nasdaq: AMZN), Alibaba is now seeing the benefits of its massive scale. The firm collects revenue mainly from commissions, marketing services, subscription fees, cloud computing, software, and other value-added services.

To leverage its platforms, Alibaba also owns media, logistics, and payment companies, and it can offer delivery, warehousing, payment, and financing services for its market participants.

This isn’t a firm that is resting on its laurels. It spent $2.5 billion in R&D last year, triple what it spent in 2014.

Despite those investments, adjusted earnings shot up 53% last year to $6.67 billion. And adjusted earnings are poised to rise another 33% by next year (compared to 2017 levels).

Chinese E-Commerce Profit Play No. 5: The Beef Blockchain – and More

When we talked on March 16, I noted that JD.com Inc. (Nasdaq ADR: JD) is becoming a great backend play on blockchain technology. That was shortly after the firm announced plans to use that advanced digital ledger system to track beef imports.

Even before these blockchain efforts take full root, JD.com is already growing at a rapid clip. The firm’s sales rose 40% last year, and sales should rise another 62% to $93 billion by next year, compared to 2017 levels.

Then again, there’s much more going on here. Simply stated, this firm has built one of China’s strongest e-commerce platforms, with both a direct sales model and a marketplace that supports third-party merchants.

It’s taking a page from the Amazon playbook. JD’s investments in a strong warehouse-and-delivery network makes it a go-to choice for clients that need goods quickly and gives it a strong advantage in China’s big cities.

We saw a big day up yesterday – and another today – as rumors of a backroom trade deal circulated. So while I think these five Chinese e-commerce whizzes will keep on soaring, tariffs or no, that news is lighting another fuse under them.

So add it all up and you can see why I think you need to ignore the noise on Wall Street about all things anti-China.

Instead, focus on the “signal” that these five winners represent.

All five are set to double in value over the next three years. With them, you’ll juice your portfolio and defy the “experts” all at once.

And that’s something truly worth being proud of.

— Michael A. Robinson

Source: Money Morning