China Profit Play #2: Buy State-Owned Enterprises (SOEs)

The idea of nationalization is taboo in the United Stated, but in China it can be a fantastic path to investment profits. Why not ride the coattails of the government taking a cut for yourself in your portfolio? It makes sense to me.

In fact, if you look at some of the stocks rallying here domestically, perhaps that whole nationalization thing is not so bad after all.

As for China, investors can buy a bundle of state-owned enterprises (SOEs) via a closed end fund or buy individual SOEs on their own. Hsu currently recommends the Morgan Stanley China A-Share Fund (CAF).

As for individual names, Hsu suggests China Aluminum (ACH), China Southern Airlines (ZNH) and CNOOC (CEO). All of these businesses are critical to the success of China's economy, and as such they all have the complete support of the government. That is a powerful insurance policy against failure and a great partner for future growth.

China Profit Play #3: Invest in Double-Digit Economic Growth

In short order China can be expected to run at a double-digit clip. At that rate, it is a sound investment approach to invest in growth. Businesses that tap into that growth should be rewarded with higher stock prices. At the center of that growth is the consumer.

Recently, Hsu recommended that investors take a look at China Digital TV Holding Co. (STV). The impetus for that recommendation comes from the expected move away from analog signals to digital. Subscribers to digital are expected to grow from 45 million in 2008 to 110.5 million in 2011. STV can be expected to benefit from that three-year 145% growth.

As impressive as the rally here in the U.S. has been, the Chinese boom is even more so. Don't miss out — get two more top China stocks here.