China Life Insurance Company Ltd. (ADR) (LFC), China Mobile Ltd. (CHL): Navigating China’s Potential Debt Bomb

Mobile

The mobile factor is incredibly important in China, as the personal computing revolution is being skipped over with a majority of Chinese in favor of smartphones. And instead of the pricey strategy of subsidizing phone costs, China Mobile Ltd. (NYSE:CHL) smartly requires its customers to purchase phones outright and then pay for minutes. This is sometimes done with a plan, but needs to be “recharged” with allotted minutes and texts.

The company has a huge share of the Chinese market since it is state-owned. Rival China Unicom is also supported by the Chinese government and means that China Mobile Ltd. (NYSE:CHL) enjoys very good competitive advantages in this environment. The company provides great long-term value for investors, despite any economic problems China might experience. They could conceivably have a small revenue reduction related to economic troubles, but it is unlikely to drastically reduce their revenue growth.

Search technology

Google has long struggled with China because of censorship. That’s created quite a loggerhead between the two sides. It has resulted in lackluster financial performance for Google in China, even though they have been able to carve out a Chinese niche in mobile. But, the tremendous upside has been afforded to Baidu.com, Inc. (NASDAQ:BIDU), which has happily complied with the Chinese government’s censorship requirements for search results.

That has essentially made Baidu the Google of China. Baidu’s revenue numbers keep increasing quarter over quarter. Just like Google, a lot of Baidu’s revenue comes from online advertising, a market that Google derives tens of billions of dollars from. And Baidu has been able to handle competition well, as the Chinese search engine enjoys a huge piece of the Chinese search pie. Many have reported that it has a dominating 75% share.

Bottom line

There are not many investments that can be made in China through the U.S. stock market. But for the time being, that might be a good thing given the problems that they face in real estate. While American companies like Google might seem to be good bets for the future of China, homegrown alternatives will likely pay off better in the long run.

Look for eventual reforms in the way China operates because of what will happen with their problems in their real estate market. It appears that both China Mobile Ltd. (NYSE:CHL) and Baidu are good investments for the long-term because of this.

The article Navigating China’s Potential Debt Bomb originally appeared on Fool.com.

Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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