Why China is Spending Billions on R&D

 "Quality means doing it right when no one is looking." - Henry Ford

What do you think of when you see or hear the phrase “Made in China”? You don’t exactly think ‘high quality’, do you?

Exhibit A:

 Chinese car vs. German bicycle

Chinese car vs. German bicycle

 

China acknowledges their reputation. They know that seeing 'Made in China' on your product leaves a bad taste in your mouth—think mass-produced, low-quality, cheap knockoffs.
  
Worse, they've spent decades 'stealing' from the West. It's the norm in China to disregard intellectual property (IP) rights.
  
Despite all of this, it's still proud of the phrase's ubiquity. ('Made in China' is famous, after all). The proliferation of manufactured Chinese goods is one of the reasons China has become such a manufacturing powerhouse.
  
That's why it believes 'Made in China' can be salvaged, in a bold way. 'Rebranded', if you will, to instead convey quality and innovation... and I think they may just pull it off.
  
Enter the 'Made in China 2025' Initiative, China's master 'debt-driven' plan to bolster hi-tech companies domestically and revolutionize their image. And therein lies some interesting investment opportunities.
  
Announced in 2015, the drive is aimed at these 10 key sectors:

made in china 2025 1.png
made in china 2025 2.png

By 2049 — the PRC’s 100th birthday — the country plans to become the leader of global manufacturing.
  
Ambitious, but China is investing massively into R&D. They have become the second highest spender on R&D in the world, in the billions of dollars. 

rd_expenditures.png
 

How does this affect me?
  
China is injecting large sums of cash into their Technology Hardware & Equipment industry and some companies are undoubtedly going to experience massive growth from this special government treatment.
  
Three companies we are monitoring in this industry are Universal Scientific Industrial Shanghai Co Ltd (601231:CH), Fiberhome Telecommunication Technologies Co Ltd (600498:CH), and Hengtong Optic-electric Co Ltd (600487:CH).
  
We're also tracking the Health Care Equipment & Services, Software & Services, and Pharmaceuticals, Biotechnology & Life Sciences industries, as we expect them to receive substantial capital injections from the Made in China 2025 Initiative.
  
However, there is one special company on our watchlist—a Chinese manufacturer—that is uniquely-positioned to profit from Made in China 2025.
 
That's why we made it our stock highlight in our June issue of Asia Insider Report. Asia Insider Report is our premium monthly publication where we spotlight one stock that we believe has compelling fundamentals after a month's worth of research and vetting.
  
You can read your preview of my Asia Insider Report June 2018 issue here.
  
I'm sharing it with you because even if you have no intention of becoming a paid subscriber of my research, inside is valuable content about Made in China 2025 and its effects on the Chinese economy.

Peter Pham