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The investment case for China’s indigenous software and IT industry. The industry will benefit from the escalating trade war, as the government provides stronger intellectual-property (IP) protection and the labor-productivity gap between China’s IT sector and its developed-economy counterparts narrows.

China’s software and IT sector generated total revenue of 6.31 trillion yuan (around $940 billion) in 2018, an increase of 14.2% year-over-year, according to the Ministry of Industry and Information Technology (MIIT). The sector’s profitability also improved, from 12.7% in 2017 to 12.8% in 2018, and the strong growth momentum continued into the first half of this year, despite the escalating trade disputes. The industry’s total revenue reached 3.28 trillion yuan in the first six months of 2019, representing year-over-year growth of 15%. According to the National Bureau of Statistics (NBS), the value-added (GDP) of the IT and software industry grew 21% year-over-year in the first half of 2019—more than double the overall GDP growth ...

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