Against the backdrop of overcapacity in manufacturing, persistently high inventory levels, and the disappearance of investment-driven economic growth, the traditional manufacturing sector remains sluggish. In 2014, we focus on sub-sectors of military equipment strongly supported by national policies and high-end equipment manufacturing driven by market demand.

    Main Line One of High-End Equipment Manufacturing

    The robotics industry has clear policy guidance and development goals; rising human resource costs and demand for high-precision, high-quality products; the industry advantages of robotics and a domestic market growth rate of over 52% in the next three years.

    Main Line Two of High-End Equipment Manufacturing

    Forklift sub-sector and core component manufacturing under construction machinery. In 2014, the construction machinery industry is experiencing a weak overall recovery; attention should be paid to seasonal sales changes and trading opportunities brought by improving downstream data. We focus on the growth of the forklift industry driven by logistics fixed asset investment and logistics costs, as well as investment opportunities in core component manufacturing for construction machinery.

    Main Line One of Military Equipment

    Short-term event-driven investment opportunities. We focus on investment opportunities arising from short-term unexpected events. First, conflicts in the air identification zone represented by the East China Sea have led to deterioration of the local situation; second, aero-engines have been selected as a national major special project, increasing R&D investment in core military components; third, high-end military equipment represented by the J-15 is being deployed to troops in batches, and the transition from second-generation to third-generation fighter jets is accelerating.

    Main Line Two of Military Equipment

    Asset securitization of military equipment. National policies strongly support the asset securitization of qualified military enterprises; research institutes are the core assets of military enterprises, possessing technology and resources, but lacking market resource allocation mechanisms and unable to balance "quality, efficiency, cost, and profit"; after private enterprises enter the military field, industry competition will intensify, and enterprises must expand funding sources from their own perspective to break through development bottlenecks.

    Main Line Three of Military Equipment

    Military-civilian integration. The "Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reform" at the Third Plenary Session guides advantageous private enterprises to enter the fields of military product research, production, and maintenance; the "Regulations on the Approval and Management of General Aviation Flight Missions" issued by the General Staff Department and the Civil Aviation Administration allows military airports to be used for civilian purposes and delegates approval authority. These two policies will remove obstacles to the development of general aviation, and the general aviation sector will enter a growth phase.

    Main Line Four of Military Equipment

    Modernization and upgrade of military equipment. China's steadily growing military spending provides the foundation for military procurement; changes in military product pricing models and the shift of military spending toward military equipment procurement and R&D increase financial support; the mismatch between China's current military equipment and its status as the world's second-largest economy makes the upgrade and transition of military equipment urgent; severe domestic and international situations accelerate the modernization of national defense.