links for 2005-07-29
VC performance distribution rigidity
Prabhakar Raghavan leaves Verity for Yahoo
Roberts' memos from his Reagan days, is this the country you want?
good economic analysis on China's impact throughout the globe
From the WSJ:
U.S. Venture Capital Floods 'Chinese Garages'
BEIJING -- When Kewei Yang set up the Chinese office of his high-tech company, Analogix Semiconductor Inc., he squeezed about a dozen employees into a cramped high-rise apartment here. One of Mr. Yang's venture-capital backers called it "the Chinese garage" -- the Asian equivalent of the Silicon Valley home workshops that spawned big companies such as Hewlett-Packard Co...
Early-stage investors are plowing money into China, and often posting permanent staff here, despite concerns about political instability, tight controls on capital and a dearth of local management talent. U.S. financiers say huge domestic demand for high-tech gadgets and sophisticated technical gear in China is hard to ignore, particularly when it spawns genuine local innovation in fields such as telecommunications and semiconductor design -- not just "me too" technologies riffing off Western products...
The total number of U.S. venture-capital deals in China in 2004 soared to the highest level in 10 years, according to the Arlington, Va.-based National Venture Capital Association. The 43 Chinese deals dwarfed the 24 investments made by U.S. venture capitalists last year in India, a country better known for its high-tech prowess.
Although the $557 million that U.S. venture firms invested in China last year was less than the $725 million invested in 2003, total venture-capital investment in China last year -- including non-U.S. firms tracked by Beijing-based research concern Zero2IPO Ltd. -- hit $1.27 billion, up 28% from 2003. Indeed, Doll Capital Management co-founder David Chao, at a venture-capital conference in Beijing this month, raised the possibility of a "bubble" in the market, particularly for mid- to late-stage investments in China...
"A lot more people will lose money in China than make money," says Andy Yan, the Hong Kong-based managing partner of SAIF Partners, which manages the $400 million, China-focused Softbank Asia Infrastructure Fund. SAIF just raised a second $640 million fund also concentrated on mainland Chinese companies...
Other venture-funded companies have exploited the huge Chinese mobile-phone market, now the largest in the world, and the Chinese appetite for downloading services such as ringtones and horoscopes to their handsets. Many companies receive business incentives from the government, such as tax and rent breaks, because Beijing is intent on building its own, domestic high-tech sector.
The government also can be a problem for venture investors, however. Some investments are being put on hold until new rules requiring approvals and registrations for the offshore transfer of assets by Chinese residents are clarified, for example.
But Duane Kuang, who oversees Chinese investments for Intel Capital, the venture arm of chip giant Intel Corp., says the rules are likely just "another idiosyncrasy of investing in China" and not a long-term barrier to investment...
Worth a read in its entireity though not too much new for those familiar with what's going on out here. I did clip a reference to our IPO and subsequent stock price "plummet" in the interest of brevity - wink, wink. Analogix being "based" in the Valley with most of their staff here is a model that I'm hearing more of. It gives US investors an easier contact window, and of course, the startup gets the advantages of not being a domestic Chinese company.
Graham & Schumer want more
Senators warn China on currency: Graham won't accept 'political fig leaf' on yuan peg
Sens. Lindsey Graham, R-S.C., and Chuck Schumer, D-N.Y., said they were encouraged by China's decision last week to let the currency appreciate by slightly more than 2% against the U.S. dollar, but expressed concern over a subsequent statement by China's central bank, which warned that there would be no further changes in the currency's valuation...
Schumer said he and Graham remained optimistic China would let the market play a role in dictating the value of the yuan.
If China doesn't let the currency appreciate further, the senators said they would press ahead with legislation to impose 27.5% tariffs on Chinese goods.
"While the Chinese central bank has said that they will not do another fixed valuation in the near future, we trust that the Chinese will allow market forces to work. "But we want to be very clear - our bill is still scheduled to be voted on before the end of the Senate session in October. If it seems like the Chinese are moving forward - great; if not, we are still ready to vote on our bill," Schumer said.
Silly grandstanding or political gamesmanship? Maybe both.
For all their talk, it'll never pass and therefore never come to a vote. But you can never say never so, if the US imposes 27.5% tariffs on Chinese goods I will eat my hat. If I had a hat. Though if I did it would probably be made in China. So maybe I wouldn't eat it since it would cost me 27.5% more to replace it.
links for 2005-07-28
Sichuan peppercorns, one less thing China has on the US
Rebecca MacKinnon's blog: lots on Cisco working w/ China's PSB on their nationwide firewall
many in China don't mind the censorship
Sept 10, I'll be in London
nice post on worldview=ego
Evslin on leadership
bunny re-enactments of great films
burger time no more?
Here's another post where I'll use rumors to make a larger point about China. Maybe I'll make some sense even if the rumors prove false...
Today at work, I heard that two of our cafeteria service providers are losing money and are going to close up shop. Unfortunately, one of them is the Rendezvous Cafe, famous for having very serviceable American style hamburgers. The other serves more local fare which I prefer to get from another restaurant here. So no great tragedy.
Restaurants going out of business. Nothing to write about you say? But these two shops are always busy at lunch. I mean mobbed. After all they have captive audiences out in our high tech park. About 5k SMIC employees alone to target.
Apparently they can't make money with their current prices. I know, I know, busy restaurant not making money - just raise prices until you maximize profitability while giving up some customer volume. But not here, because our general affairs management won't let the restaurants raise prices. So instead the restaurants may be moving out (we'll see if I can lobby on their behalf), and leaving a lot of underserved, hamburger-hungry employees behind.
Which brings me to my point. I think most people here still haven't internalized the change to a market economy. They're used to a command and control system where prices are set from on high. This despite the tremendous amount of price haggling (for knock-offs, for fruit from the local stand, even sometimes for taxi fares) that happens here. In some ways, haggling even reinforces the arbitrariness of prices since haggling here is fundamentally about lack of transparency in the transaction and oftentimes at 3x or more mark-up for non-locals.
Many here can't yet fully trust the market to find the "right" price at which the restaurant would make money, and employees would still get fed. So either our people fix a price or the alternative would have to haggle for each burger sold (adversarial pricing can be justified since the price you paid would be based on your haggling skills).
Maybe more penetration by eBay and Taobao and things will change. Online auctions with multiple prospective buyers transparently bidding up goods until they are at their right price could be a nice mental transitional step.
Bokee & Feedburner link up
One of the most interesting aspects of the partnership is our joint effort to offer digital media downloads like ringtones and wallpaper via RSS feeds. Mobile has long struck us as fertile ground for commerce feeds, and we're looking forward to working with Bokee to explore this market in China..
And the comments note that an "overseas" datacenter is on the way.
This reminds me that I've been working on a couple of essay-ish posts about tipping points and the really, really long tail in China. Hopefully I can put them into some sort of coherent form soon. But (localized) distribution to global (mobile) customers through syndication fascinates me. Tracking and pushed recommendations take this to some very interesting places.
More coverage on Chinese State Councilor Tang Jiaxuan's talk from the FT, including some details on the Chinese hiring of lobbyists:
...Seeking to build political influence in Washington, the Chinese embassy has retained Patton Boggs to lobby on a wide range of issues before Congress, according to a lobbying registration statement filed last week with the US Department of Justice.
The enlistment of Patton Boggs which has also represented such countries as Saudi Arabia, Kuwait and Pakistan highlights China's efforts to respond to the rising wave of anti-Chinese sentiment in Congress. Beyond trade, the ill-feeling is also driven by Chinese threats towards Taiwan and China's rapid military expansion which was highlighted this month by a special Pentagon report mandated by Congress.
Over the past two years, China has significantly expanded its presence in Washington, with Chinese government ministries and even provincial governments hiring several prominent lobbying firms to work on trade issues in particular...
Patton Boggs confirmed that the firm would provide counsel to the embassy on “congressional matters”. The contract, dated July 11, calls for the embassy to pay a $22,000 monthly retainer for the firm's services.
Hey, with that $22k monthly retainer, you can affort one luxury apartment in the Shanghai Centre.
From CBS MarketWatch:
WASHINGTON - A Cabinet-level official of the Chinese government said Wednesday that China would "gradually" open its markets and import more than $1 trillion worth of goods from the United States over the next five years.
In the meantime, the U.S. government should avoid protectionism as a response to recent trade problems, said Chinese State Councilor Tang Jiaxuan in speech before a group of American businessmen...
"To politicize trade issues or to get emotional about them does not help solve problems," he said.
Tang said that trade between China and the United States is mutually beneficial. He said that American investment, technology and managerial expertise have "instilled vitality in the Chinese economy."
"Many young Chinese are making calls with Motorola cell phones, working with Dell or Compaq laptops and hanging out with friends in Starbucks, McDonald's or KFC," he said.
The U.S. benefits from the importation of "quality and affordable" Chinese goods that have "alleviated the inflation pressure and saved American consumers nearly $20 billion every year," he said.
The current flow of trade between the two countries tilts significantly in China's direction. But China doesn't want a prolonged trade surplus, Tang said.
The U.S. trade deficit with China reached $162 billion last year compared with $75 billion with Japan and $109 billion with the European Union.
According to Commerce Department data, U.S. exports to China totaled $35 billion in 2004, up 22%. So far in 2005, exports are running 7.6% ahead of last year's pace. Meanwhile, imports from China totaled $197 billion in 2004, up 29% from 2003. This year, Chinese imports are up 28%.
U.S. exports to China would have to grow about 65% per year for five years to total $1 trillion...
Preaching to the choir of American businessmen at the US-China Business Council. Any effective Chinese PR outreach will need to get to the working class and mainstream media. It's the presumption that these people will respond favorably to anti-Chinese rhetoric which is fueling Congress to "politicize trade issues" and "get emotional about them." That and the fact that most US "leaders" lack the will and/or intellectual means to gain a fundamental understanding of any issue other than their own electability.
apartment for rent
This week we look at a serviced apartment offered by the Shanghai Center on Nanjing Road W. The three-bedroom, two-bathroom apartment is spacious (227 square meters) and full of light and also has plenty of storage space.
The Shanghai Center has a range of apartments available, from studio sized 47 square meters to a four-bedroom, 384-square-meter penthouse. Rentals for the apartments range between US$2,300 and US$15,000 per month (based on yearly rental fees).
A rough rule of thumb we use for cost of living/purchasing parity adjustments is to multiply a dollar spent here times five. That makes the $15k per month apartment's annual rent equivalent to about $900k spent in the US.
Are there really expats worth putting up in $900k/yr apartments? Are there still companies out there that see Shanghai as that much of a hardship assignment? And more importantly, are they accepting resumes? [ in all seriousness though, how good can it be to work for a company with such profligate spending? they must have skewed priorities/be clueless about a number of other things too, no?]
links for 2005-07-27
China trading arms for oil with rogue regimes greater threat than Cnooc acquiring Unocal
going to have to find the dvd for balzac and the little chinese seamstress