China's Winning Warehouses

I'd look at these three:

• Orient Overseas International, a Hong Kong company with three main businesses: container transport and logistics, ports and terminals and property development. Almost all of the revenue of the company's container subsidiary, Orient Overseas Container Line, comes from Asia and trans-Pacific routes.

  If you believe the U.S. is headed for an economic slowdown, the stock is certainly pricey right now. But I like the company's cash position: Orient Overseas sold its North American container terminals in 2006 and has said it is considering options to reinvest the proceeds in Chinese ports and in increasing its container fleet. The company has also spent some of that cash on a special dividend and has put an additional special dividend on its list of possible uses for the cash.

• Kerry Properties, also a Hong Kong company, like Orient Overseas mixes its logistics business with a big dose of real estate in Hong Kong and the rest of China. But unlike Orient Overseas, shares of Kerry don't give investors exposure to ocean shipping or the ups and downs of transoceanic freight rates.

  Instead, these shares are strongly tied to physical assets such as the warehouses that the company owns and manages in Hong Kong and its portfolio of infrastructure projects that includes tunnel crossings in Hong Kong and a water-treatment project in China's Inner Mongolia Autonomous Region. (So the stock fits into the framework of my infrastructure strategy.)

  Kerry Properties, despite its strong Hong Kong roots, may actually be the most globally focused of these three companies. The company has offices in Germany, France, Poland, the Czech Republic and Hungary.

• Nippon Yusen Kabushiki Kaisha is even more diversified, with interests in passenger ships, petrochemicals, information processing and travel. But the core that attracts me to this Japanese company is the combination of the company's NYK Logistics business and its ownership of Japan's largest shipping line. Nippon Yusen should be in a position to earn a good profit from those assets as China and Japan continue to evolve something resembling a unified economic structure that allocates such functions as design and manufacturing across the two countries. For the nine months that ended Dec. 31, 2006, revenue climbed 13%.

Wait, There's More

Remember, this is only half the picture. You can also make money from the response to China. And the response from the developed world to the Chinese challenge -- in this area at least -- has been surprisingly robust, especially in the U.S.