In late April, I attended a forum “China-U.S. Business Forum: Finance and Innovation” hosted by Guanghua School of Management of Peking University, my alma mater, at the New York Public Library. The speakers included Jack Rosen, CEO of Rosen Partners; Steven Barnett, Division Chief (China Division, Asia Pacific Department), International Monetary Fund (IMF); Gary Rieschel, Founding Managing Partner, Qiming Venture Partner; Hongbin Cai, Dean of Guanghua School of Management; and other China veterans. The speakers, both Chinese and American, have been doing business with China or in China for an extensive period of time. For example, Gary Rieschel has moved his family to Shanghai from the U.S. to manage his VC fund Qinming Venture Partner. The speakers were divided on the prospects for China’s economy and markets. Some of them painted a much more bullish picture than others. Differences of opinion, needless to say, are typical when a bunch of economists, business people and lawyers sit down to discuss China. Each party may have dramatically different opinions from each other. The reason is that China’s economy or market is not homogeneous, but diversified and full of self-sustained pockets that posses their own ecosystems. Broad-brush conclusions about China often sound ill-informed... Read more →

These days, the questions my clients ask me most often are how bad is the corruption in China and to what degree will Xi continue to fight it. Before I answer these questions I tell them stories from my personal experience. I want to share one story here from one of my typical trips to China a couple of years ago. My client was a private owner of a business that manufactures surveillance products. His top customers are government institutions in China. My team and I were chauffeured to a restaurant’s private room for dinner at the end of the day. At the table, we drank, ate and chatted. As dinner continued, my client started to open up and to carry out conversations with more substance, partly because of all the wine he had consumed. When we asked about how he successfully acquired government institutions as his clients, he winked his eyes and mimicked a gesture of counting dollar bills with his fingertips. Seeing that we didn’t fully understand, he gave us a long lecture. A private business owner, he had little to leverage when starting out to build his small empire. In comparison with mammoth State-Owned-Enterprises (SOEs) his company... Read more →

Yahoo! can Laugh at Last as Alibaba's IPO in the U.S. is Getting Close

No market than China sees American Internet companies fail so terribly. Google was kicked out of China, part of it because it offended the Chinese government, part of it because it lost to its local competitor Baidu. eBay pulled out of the market voluntarily after realizing it was losing ground to Alibaba's Taobao. Yahoo!'s business barely took off in China after years of struggling and trying in China. Facebook or Twitter, even worse, never got a chance to try the market out. What's more, their domains are blocked in China. Yahoo! struck a deal with Alibaba in 2005 to form a joint venture, in which Yahoo! invested $1 billion cash and Yahoo! China assets, which was valued $700 million, for a 40% stake. The whole joint venture deal was valued at $4 billion. At Alibaba's coming IPO, analysts estimate it may be valuaed around $200 billion. Even though Yahoo! was forced to reduce its share at Alibaba to 23% in 2012, Yahoo! is still going to do extremely well. Sue Decker, former Yahoo! president, looked back at what Yahoo! had done right and wrong in China in her" An Insider's Account of the Yahoo-Alibaba Deal" in Harvard Business Review Blog... Read more →

The Alibaba Effect

Tompkins International has put together a comprehensive presentation about Alibaba. It is a must read or listen material before Alibaba's August IPO at New York Stock Exchange. This 50-minute video presentation covers five topics: 1) Alibaba, what is the big deal 2) What does Alibaba do 3) Who is Jack Ma, the founder 4) Where is Alibaba headed 5) What action to take based on this Alibaba presentation One of KGA's blogs "Should Amazon or eBay be concerned about Alibaba Entering US ecommerce Market" looks at Alibaba from a different perspective. Read more →

Alibaba recently unveiled its new venture in the U.S., an eCommerce business offering similar services to Amazon and eBay, a market place for smaller vendors. The site is not available yet. Here is a peek of the home page of 11 Main. Should Amazon or eBay be concerned about Alibaba's move? In the short-term, they should not. It took a long time for Amazon and eBay to build their empires in the U.S. Even with Alibaba's deep pocket behind it, 11 Main is still a new entrant to this market, a lot of things to learn and catch up. Additionally, consumers' demographics in the States is significantly different. As a new player in the U.S., 11 Main needs some time to collect and build data to understand U.S. consumers. Moreover, U.S. eCommerce market is much different from that of China. For example, the eCommerce market is more developed in the U.S. 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. Please refer to Chinese Consumers Moving On-line. The competition in eCommerce space in the U.S. is far... Read more →