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3 posts from March 2016

Abundance in Capital or Lack of Capital - Stories about China

Tweet Not until recently, China has been a land where money seems to grow on trees. A couple of years ago, a U.S. fund went to China to raise money from Chinese investors. After the presentation, someone from the audience raised his hand. He asked the presenter to clarify whether the expected investment return of 10% meant monthly or annual. The presenter jokingly responded, "if you know of an opportunity that guarantees 10% monthly, please tell me. I want to invest my money." The person said, " Sir, few people in China will invest for a return of 10% a year." Long silence from the presenter. The audience was not joking. Chinese investors have been lending to some privately owned businesses at absurd high rates, sometimes as high as 48%/year or higher. In theory, the money serves as bridge loans for a couple of months, but at times borrowers keep it longer. Privately owned businesses are poorly served by banks. Working for big and fat State-Owned Enterprises often means less leg work, less risk and much bigger transaction in dollar amount. In need of capital for operations and expansion private companies often turn to private lenders, a reliable funding source.... Read more →

Adaptablity and Flexibility A Must in China These Days

Photo credit: University of Kent Today, one of my friends visited me, sharing his recent projects related to China. One of them is helping a Chinese technology company scout Italian design schools. This company is reinventing itself through acquisition and operation of vocational training schools, first in China and overseas the next stage. This has become a trend in China these days. I often receive inquires from different Chinese companies. They have a "shopping list" of targets that they believe will help generate revenues or profits, not necessary to be in the areas of their expertise. I categorize them into two groups of needs: 1) Proven technologies that Chinese companies can take over and plug into China market. They told me, "we do not have time to do R&D. If the technology works in the U.S., we may be able to make it work in China too. " 2) Companies with profits. Publicly listed Chinese companies are under mounting pressure to boost bottom line. Traditional industries such as manufacturing are facing most challenges of over capacity and price erosion. Restructuring is under way, a long and painful process. One of the measures is to acquire a profitable company. In the... Read more →

Tweet Inspired by Fred Wilson, who uses its AVC Blog as a diary, sand box, and therapy, I am going to keep this blog exclusive to myself and try to write as long as I can. Doing business with China and Chinese since 1991, I do not lack stories and anecdotes to share. I hope it will become a cleansing and therapy process for myself, while being helpful to those who are intrigued by this gigantic country and its people. If you want to ask me what the biggest challenges are when it comes to working with Chinese. Lack of transparency is on top of my list. It is hard to see things through, from the government to small businesses. We all remember that, late 2015, China was plunged into a chaotic situation. RMB's value was dropping like a rock vs. US dollar. Investors, both domestic and foreign, were panicking. Local Chinese rushed to banks trying to exchange all their savings into U.S. dollar. , so did some institutions, out of the fear that RMB would crash and Chinese economy would crash. Nobody from the government stood up to communicate with its people and the rest of the world. Instead,... Read more →