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Peter Fuhrman
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Chairman, Founder and Chief Executive Officer at China First Capital (www.chinafirstcapital.com) , China-based international investment bank and advisory firm for private capital markets and M&A transactions. China First Capital has a disciplined focus on -- and strives for a leadership... More
My company:
China First Capital
My blog:
China Private Equity, by China First Capital
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  • China's Relentless Rise Enters A More Challenging Phase, Where Its Bold Ambitions Confront Stubborn, Often Centuries-Old Barriers. New Analytical Report Published By Investment Bank China First Capital

    Hong Kong, Shenzhen, China, August 5, 2014

    China's thirty year transformation into a global power is entering a new phase, with a set of challenges the country has yet to solve. The economy and society have both reached levels of wealth and development that were unimaginable 30 years ago. How can continue to China push forward, against deep-seated problems in generating real innovation, in sorting out land ownership, in attracting and rewarding global investment flows?

    These issues are examined in detail in the new research study published by China First Capital, a China-focused global investment bank with a six year history advising some of China's largest private sector companies, SOEs and global Fortune 500 companies.

    The new report is titled "China Survey 2014:The Rise Continues, New Directions & Challenges". Copies may be downloaded from the Research Reports page of the China First Capital website..

    "China's economy remains vibrant and fast-evolving," comments Peter Fuhrman, chairman and founder of China First Capital. "Many of the famous China corporate successes of recent years- KFC, P&G, Coca-Cola Company -- are finding it harder and harder to keep winning in the China market. As they lose share, other companies are gaining, both domestic and international. Our report looks at this transformation through the vantage point of our experience working in China alongside some talented CEOs."

    "Investing successfully in China, either through the stock market or through M&A, also remains challenging," Fuhrman continues. "But, the effort can be repaid, since no other country can rival China today in terms of both the number and scale of money-making opportunities. "

    The new China First Capital report discusses these broad trends, and also examines the following in depth:

    • is China's investment community (PE and VC firms, stock market investors over-allocating now to mobile services and online shopping;
    • an assessment of the serious challenge facing traditional shopping mall operators and retailers mainly because of competition from soon-to-IPO Alibaba's online shopping giant;
    • a sober analysis of actual disappointing state of China's high-tech industry;
    • how China triumphed over Indi and won the battle as the world's best and biggest Emerging Market,
    • why 3M may be the most successful American company in China, but flies so far beneath everyone's radar.

    Some of the report's content have previously been published on Seeking Alpha and on China Private Equity blog.

    "Our core conclusion is that China needs to become more innovative, generate more globally-important technology breakthroughs, " China First Capital's Fuhrman summarizes.

    "Among US and European investment banks here, China First Capital has especially deep roots in China, functioning more like a local domestic firm, and not a multi-national

    one. We see China's strengths up close, as well as some of the less obvious obstacles, the interplay of tradition and modernization, the enduring impact of Confucian traditions.

    It gives us a deep level of confidence that despite the challenges of the past and present, China's rise will continue."

    China First Capital is a China-focused international investment bank and advisory firm for private capital markets and M&A transactions in China. China First Capital has a disciplined focus on -- and strives for a leadership position in -- four distinct business areas.

    These are:
    - Private placement and equity financing for China's high-growth entrepreneur-led companies;
    - Private equity Secondaries, buy-side and sell-side representation for acquisitions
    and early liquidity events;
    - Strategic M&A transactions, domestic and cross-border;
    - Restructuring, financings and advisory for China's State Owned Enterprises.

    China First Capital serves a distinguished group of clients, including industry leaders in China, both private sector companies and SOEs, as well as global corporations actively expanding within China.

    China First Capital's research and analysis on China, its capital markets and private equity industry are often featured in international media including The Wall Street Journal, Financial Times, The Economist, New York Times, Washington Post, Bloomberg, China Daily. China First Capital's chairman Peter Fuhrman is an occasional columnist for Seeking Alpha and three prominent Chinese-language business publications, 21st Century Business Herald, Caijing and Forbes China.

    For up-to--date commentary and analysis, visit: chinafirstcapital.com/blog

    For more information, contact:

    Email: info@chinafirstcapital.com

    Phone China: +86 755-86590540

    Aug 02 8:27 AM | Link | Comment!
  • Chinese PE Firms Too Tech-Focused: Report. AsianInvestor

    July 28th, 2014 No comments

     

    Chinese PE firms too tech-focused: report

    By Elva Muk | 28 July 2014

    -

    Company valuations are being pushed up as PE firms chase the same targets, and market domination by big players like Alibaba is squeezing profit, says China First Capital.

    Spurred by the success of the likes of Tencent and Alibaba, Chinese private equity and venture capital firms have become too focused on technology and e-commerce investments, argues a new report.

    Nearly all publicly announced deals this year have been in the technology sector, says the China Private Equity 2014 report from China First Capital, a private capital markets advisory firm. They include online shopping sites and mobile travel, game and taxi-booking services.

    Though China has restarted its initial public offering process after a hiatus of more than a year, US listing also provides an effective way for PE firms to exit their investments. Chinese internet and mobile companies Zhaopin, Cheetah Mobile, Sina Weibo and Qihoo 360 have already floated in the US market this year.

    Though Tencent and Alibaba are shining examples of success, the investment outlook for newly established technology companies may not be as rosy, the report says. These firms do not enjoy a technological barrier to entry and rely "on the same prayer-for-low-profitability outcome: a purchase down the road by China's two internet leviathans, Tencent or Alibaba".

    But China First Capital forecasts that the duo will soon lose their appetite for buying smaller Chinese internet firms.

    Moreover, domination by the major players has squeezed the growth potential of newcomers. Alibaba commands close to 50% market share of the country's online shopping in terms of transaction volume, while Tencent is similarly dominant in online gaming. Almost all the money goes to these two firms, the report notes.

    Further, the investment landscape in China is less dynamic than some elsewhere. The US has a greater number of venture capital trade buyers for successful VC-backed companies, and less monopolistic internet and mobile industries and a richer early adaptor market to tap, the report notes.

    In China over the past two years, PE firms have invested heavily in Chinese shopping sites that follow a model similar to Groupon. However, some projects have lost money because monetising the sites has proved difficult.

    Another obstacle in China for private equity in building up investment is the high cost of acquiring clients. In most VC-backed companies in the US, the head of business development is responsible for generating growth at the cheapest cost.

    This approach is uncommon in China. A typical method of acquiring customers in the mainland is to pay for a high-ranked listing on search engine Baidu, which handles over 60% of search requests in the country.

    "The 'pay to play' rules of China's internet [industry] lead to companies taking lots of expensive shortcuts, often burning a lot of PE and VC firms' cash," the report said.

    Further, PE firms are chasing the same investment themes and companies, resulting in rising valuations. "It is an ongoing example of inadequate diversification by industry or stage," it added.

    China's PE capital raised has grown five-fold to over $100 billion since 2005, while the number of firms has grown to 1,000.

    - Haymarket Media Limited. All rights reserved.

    http://www.asianinvestor.net/News/388932,chinese-pe-firms-too-tech-focused-report.aspx

    http://www.asianinvestor.net/Tools/Print.aspx?CIID=388932

    -

    Jul 28 7:15 PM | Link | Comment!
  • Neue Zurcher Zeitung Interview With Peter Fuhrman

    -

    Monday's "Neue Zurcher Zeitung" of Switzerland published an article based on the interview I gave last week while in London with the newspaper's financial editor Christof Leisinger. For those whose German is up to the task, click here to read the article in full.

    To get a flavor of what we discussed, here are some of the quotes, in English:

    "China has the world's second largest economy and capital market. GPD growth and corporate earnings are both growing far faster than in OECD countries. And yet, global institutional capital is in almost all cases seriously underweight China. How to explain this? Simple, there are just too few attractive and legal ways for international capital to invest in China.

    "The Chinese companies quoted in the US and Hong Kong mainly come from two unrepresentative pools: large, slower-growing Chinese state-owned companies, and internet and mobile services "concept" stocks often with limited revenues and profits. The powerful engine of long-term economic growth in China, its millions of successful private sector entrepreneur-founded businesses serving domestic market, are almost all off-limits to non-Chinese investors. To invest, you need state approval to buy Renminbi and later permission to convert back into dollars, Euros or other freely-tradable currencies.

    "China no longer especially needs or wants Western capital to finance its economic growth. The best way now to invest in China, to increase allocation there, is probably through M&A, by putting money into US or European companies that are aggressively acquiring good Chinese private sector ones."

    "Overall, the country is doing an excellent job managing the transition from export-reliance to domestic consumption, a economic challenge Germany is still struggling with. The Chinese economy has undergone enormous structure change over the last five years, most of it positive, with more and more of economic activity coming from the private sector, rather than state-owned one, from producing and selling products to satisfy the needs of China's 1 billion consumers rather than those of Wal-Mart shoppers in the US.

    "On the macro level I do not expect any big change anytime soon, no free convertibility for the Renminbi. But, more quietly and pragmatically, the Chinese government has solved a rather large problem related to this, by making it legal and simple now for every Chinese citizen to use Renminbi to buy up to $50,000 a year in dollars, to pay for travel, educating their children, or buy shares or other assets outside China. In other words, the capital account remains closed, but Chinese individually now have a lot of the benefits of free exchange between dollars and Renminbi. It's one of the reasons the Champs d'Elysees and Bond Street are jammed with Chinese tourists."

    Jul 10 10:07 AM | Link | Comment!
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