If you've picked up a newspaper or followed the business headlines over the past few years, then you're no doubt familiar with the biggest theme in global economics these days: the tremendous boom in China.

     Globalization, increasing free trade and a hunger for low-cost labor have led to rapid economic growth in China -- the nation's gross domestic product (GDP) rose +11.4% in 2007 and is expected to jump another +10.0% in 2008.  And Chinese stocks have skyrocketed on the heels of this growth -- China's popular Shanghai Composite Index has been one of the world's best performers over the past five years, delivering total gains of more than +136.5%.

     With this as a backdrop, it's easy for investors to get excited about Chinese stocks because the potential is real, and the nation's phenomenal growth should continue for years, if not decades.

     But there's a problem . . .

     If you're an income investor, then China is a terrible place to search for high yields.  For the most part, companies in this emerging market pay little or no dividends; they're too busy reinvesting cash into their businesses or acquiring competitors as they strive to keep up with the surging economy.

     So, how can income investors take advantage of strong economic growth in this market, yet still lock in solid dividend yields?  The answer is simple -- invest in other Asian countries that are directly benefiting from the economic boom in China.

     Right now, one of the surest beneficiaries of China's growth is a tiny island nation off the mainland, the Republic of China -- better known as Taiwan.

     If you're an income investor looking to capitalize on strong growth in Asia, then you need to be investing in Taiwan.

     This small island nation doesn't get much media attention, and you'll rarely hear about it in the financial news.  But when it comes to income, Taiwan packs an incredible punch.  In fact, Taiwanese stocks are now dishing out some of the highest average yields on the planet . . . 

     And remember, that 4.91% figure is just the average -- many individual stocks in Taiwan are now paying out yields of 10%, 15% . . . even 20% or more.

    High Yields Aren't the Only Attraction

    In recent months, most of the headlines throughout Asia have centered around the 2008 Olympic Games in Beijing.  But for investors in the island nation of Taiwan, other recent events in China may have been even more significant.

     In May, Taiwan elected a new pro-Chinese president -- Ma Ying-jeou.  And in mid-2008, for the first time in 60 years, the two countries were connected by regular, direct commercial flights -- yet another sign of the warming relations between these Asian neighbors.

     As this relationship fortifies, Taiwan's already strong economic prospects will only get stronger, fueled by China's unstoppable growth engine.  I've identified a handful of great investments that are ready to profit from that strength -- and my favorite pick is paying an outstanding yield of 21.4%

     And for investors, this could be a case of history repeating itself.  When Taiwan first lifted its travel ban to the mainland in 1987 and allowed capital investment in China for the first time, the Taiwanese market went on a three year run, increasing nearly +1,000%.

     Although I don't think we'll see +1,000% gains this time around, stronger economic ties between the two nations could easily lead to a doubling or tripling of Taiwanese stock prices over the next few years.

     Taiwan Policy Shift Thaws Once-Icy Relationship

     The fact that China's economic growth is doing tremendous good for Taiwan is ironic, as the two countries have engaged in a decades-long family feud over Taiwanese sovereignty.  But in pragmatic fashion, they're increasingly setting aside their differences to work together economically.

     That process was speeded up when Ma Ying-jeou became Taiwan's president in May.  The leader of the Nationalist Party (also called the KMT Party), Ma was elected on a platform of stronger economic growth and closer ties with mainland China.  Ma's presidency follows eight years of administrative policy which took a harder line against mainland China.

     Taiwan is already a major investor in China's economy, and a million Taiwanese citizens live and work on the mainland.  And Ma's agenda to further formalize those economic ties is well on its way to being implemented. 

     The commencement of direct commercial flight service was crucial because it shortens the travel time between Taipei and some key mainland cities by up to 75% over existing, indirect routes.  And in mid-2008, the Taiwanese cabinet also approved new rules allowing Taiwanese companies to invest up to 60% of their net worth in mainland China, versus 40% currently.

     Ma's policy of engagement could eventually even lead to a formal peace agreement that acknowledges, if not officially recognizes, both countries' sovereignty.  In practical terms, that has already occurred.  But by reassuring the world that armed conflict is not going to happen, China and Taiwan could increase confidence in each others' economies and financial arrangements.  Although that will help boost stock prices both countries, Taiwanese share have the most to gain from these newfound economic ties.

     In addition to improving Taiwan's relationship with mainland China, Ma wants to strengthen trade relationships with other countries and establish Taiwan as one of the most flexible and progressive trade partners in the world.

     Recent Pullback Has Investors Locking in Higher Yields    

     Thanks to a recent sell-off in international markets, Taiwan's stock market is now dirt cheap.  Taiwanese stocks are trading at less than 12 times earnings -- versus a P/E of 19 for China and an extremely pricey P/E of 26 for the United States.

      But if you're an income investor, what's especially attractive about Taiwan is that its average stock yields nearly 5%, providing many opportunities to lock in outstanding yields and participate in the strong gains likely to unfold in Taiwan. 

     Although the vast majority of Taiwan's most attractive stocks don't trade on U.S. exchanges, you can gain instant access to a broad basket of attractive, dividend-paying Taiwanese stocks by investing in exchange-traded funds (ETFs).  Best of all, many of these funds trade right here at home on the New York Stock Exchange (NYSE), and you can easily buy and sell them just like regular stocks.

      Both The Taiwan Greater China Fund (NYSE: TFC) and the iShares MSCI Taiwan Fund (NYSE: EWT) are solid investments with stellar track records, but their heavy weighting in tech stocks has held yields below what income investors should expect from this region.

     My favorite Taiwanese investment also trades right here at home on the NYSE. It's a closed-end fund that has raised its dividend more than +140% over the last three years.  And unlike most Taiwan-focused funds, almost 50% of its holdings are in mid to small-cap companies, which have a history of rebounding further and faster after a market slowdown.

     Of course, the best news of all -- this fund has dished out payments of $3.618 per share over the past year, giving it a 21.4% yield based on recent share prices.

     For the last six months, I've been keeping my Global Dividend Opportunities newsletter subscribers up to date on the warming relationship between China and Taiwan -- and the red-hot opportunities this situation is creating for income investors.

     My staff and I just put the finishing touches on a free report that features some of the best regions in the world for high-yield investors like yourself.  And along with this free report, I've also included the name of my favorite Taiwan-focused fund.  Please visit this link to instantly access your complimentary report and to learn more about my 100% FREE newsletter -- Global Dividend Opportunities.   

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