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June 2014

4 posts from May 2014

The successful IPOs of Chinese ecommerce companies VIPSHOP (ticker VIPS), Jumei International (ticker JMEI), Jingdong (ticker JD) and the much-anticipated IPO of Alibaba in the near future, have one thing in common, ecommerce. Stock Performance of VIPS Stock Performance of JMEI Stock Performance of JD These companies have benefited from Chinese consumers’ embrace of online shopping, which has been a result of fast-growing disposable income per capita in China. Urban Household Per Capita Disposable Income Retail Sales* Internet Sales 2008 2545 1 trillion 2012 3962 1.58 trillion 213 billion 2016 2.46 trillion (E) 611 billion (E) Currency = USD * Excluding motor vehicles, fuel, and the sales of products that could be characterized primarily as the provision of a service, such as meals in restaurants. Online retail sales in the U.S. was $225.5 billion in 2012 and will grow to $384 billion, according to eMarketer. China surpassed the U.S. in the online retail sales by 2013; however, China's online retail penetration of Internet users was 42.9% in 2012, compared to 71.6% in the United States. iResearch expects that China's online retail penetration may increase to 53.7% by 2016. What do Chinese consumers like to shop online? Consumption of apparels and... Read more →


Recent Changes in China's Capital Market

China's central government relaxes its control over Chinese companies outbund investment in overseas asset by introducing a filing-based system vs. approval-based system. Compared with the old system, which requires approval from the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM) and the State Administration of Foreign Exchange (SAFE) for any investment above $100mm, under the new policy, a Chinese company only needs to file with NDRC if the transaction is below $1 billion or NDRC's local representation if below $300mm. However, SAFE and its currency control still remains a major hurdle for outbound investment. For more detail, please visit Schulte Roth & Zabel's report on this subject. China is going to launch the Third Board in August 2014. The Third Board is similar to the bulletin board in the U.S. Unlike other main boards in China, which accept a limited number of companies each year, the Third Board will accept up to 1000 companies per year, in a hope to help more small enterprises to raise capital. However, the new board has a high bar of RMB 5 million net worth (approximately $800K) for retail investors. The board will include 100 Chinese market makers to create liquidity,... Read more →


From time to time, owners of small and mid-sized companies in the United States have approached me with the question: "We have excellent products/services/technology, can we make some money from China with them? By the way, though we can't afford to set up a China-team to handle all the work, challenges and potential headaches, we'd still love to explore the opportunity." I get it. What they mean is, they want to collect checks while leaving the hard work and stress to someone else. I am glad that these companies' owners have this idea. Why not? First of all, I want to reiterate that it is important to make a plan for China as soon as you believe you have something unique to offer. Committing to the sale and distribution of your products in China is an excellent starting point. It may not be as hard as you think. Minimally, you can add the Chinese language to your website and support Paypal or credit card payment. Chinese are searching for things to buy all over the world. At the same time, more and more Chinese students are attending U.S. colleges and universities, estimated 250K enrolled, not to mention those Chinese who... Read more →


Early in the morning, while attending a conversation on Ukraine, Russia and the West at Harvard Club, my WeChat account on my iPhone received a message inviting me to a dinner at Evergreen Shanghai Restaurant on 38th Street in Manhattan tonight. One of the senior guys from a Chinese asset management company headquartered in Hong Kong would swing by New York tonight and wanted to meet some alumni. The message was sent out to a number of people through WeChat group set up by the organizer. I responsed "yes, will be there," and saw some other alumni already respond. At night, I got together with this asset management alum together with more than 10 other people, among them was an alum from ZhenFund, an angel investment fund owned and run by the founders of the New Oriental (EDU), a New York Stock Exchange listed Chinese company. Right after dinner, everybody moved to the corner, pulled out their phones and started scanning each other's QR Code; this is how to add people to your WeChat contacts. We promised to add the alum from Hong Kong to our alumni's WeChat Finance Group to help him keep in touch and participate in discussions.... Read more →