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Peter Fuhrman
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Chairman, Founder and Chief Executive Officer at China First Capital (www.chinafirstcapital.com) , a China-based international investment bank and advisory firm for capital markets and M&A transactions. China First Capital was established in 2007 and has its headquarters in Shenzhen, China.... More
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  • Toiling from the Tang Dynasty to Today – the high cost of Chinese real estate
     How long would it take an ordinary Chinese peasant to save up and buy a nice apartment in Beijing? You’ll need to brush up on your dynastic history.

    1,400 years ago, as the Tang Dynasty dawned in China, a peasant began farming a small plot of decent land 6mu (one acre) in size. Every year, in addition to providing for his family’s needs, he was able to earn a small profit by selling his surplus. His son followed him on the land, and maintained his father’s steady output and steady profit. Same with is children, and children’s children, through the Song, Yuan, Ming, Qing Dynasties into the Republican period and then the modern era marked by the founding of the People’s Republic in 1949, down to present day.

    Some 280 generations later, there should now be just about enough in the family bank account for the family to pay cash for a new two-bedroom apartment in Beijing. This is assuming no withdrawals from the bank account during that time, and even more unlikely, no bad years due to floods, famine, locusts, rebellion.

    I heard this calculation second hand, and so can’t check the figures. But, it certainly has a ring of truth about it. Property prices in Beijing particularly, but other large cities as well, have reached levels utterly disconnected from average earning levels, especially in rural China.  New apartments can now cost over USD$1 million. Prices continue to rise by over 5% a month, despite aggressive actions by government to curb the increases in residential property prices. According to the Wall Street Journal, “Housing prices in the U.S. peaked at 6.4 times average annual earnings this decade. In Beijing, the figure is 22 times.”

    The collapse of this “housing price bubble” has been widely predicted for years now  — not since the Tang Dynasty, but it sometimes seems that way. The housing price crash was meant to be imminent two years ago, when prices were about 30% of current levels.

    Still, they keep rising, most recently and most dramatically in second and third tier cities in China, places like Lanzhou, a provincial capital in arid Western China, where the cost of a 100 square meter apartment has doubled in price in the last year, to about $300,000.  Some apartment owners in Lanzhou earned as much profit  during 2010 from the sale of their property as a typical peasant in surrounding Gansu Province might make in a century.

    My prediction is that housing prices may soon peak relative to incomes, but will keep moving upward. There are a few fundamental factors at work that raise the altitude of housing prices: rising affluence, China’s continuing urbanization and a dearth of alternative investment opportunities. Real estate, despite what can seem like dizzying price levels, is often seen to be a safer long-term bet than buying domestically-quoted shares.

    Introducing property taxes, and allowing ordinary Chinese to buy assets outside China, would both alter the balance somewhat.  But, many a hard-working peasant is still going to need a thousand years of savings to join the propertied classes in Beijing.




    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 13 9:21 AM | Link | Comment!
  • Chinese Language Article on Huge Risks of OTCBB IPO for Chinese Companies
    This is Chinese-language article I wrote on the rampant dangers for Chinese companies to list themselves in US through a reverse merger or OTCBB listing. 

    美国政府整顿危害中国企业的OTCBB上市和反向收购以我的经验看来,一个成功的中国民营企业面临的最大风险不是经济通胀或是市场竞争,而是在美国市场糟糕的资本运作,特别是反向收购交易和OTCBB上市。

    这些失败的交易给越来越多的民营企业带来了致命的伤害。据最新的统计,超过七百家中国企业已经完成了反向收购或者OTCBB上市。其中,超过80%的交易都未能成功让企业筹集到足够的资本来实现企业发展的初衷,而且股票的流动性也不充沛。在OTCBB上市的企业都会得到一个有可能登陆纳斯达克的承诺,但是对于超过80%的企业来说这只是一句空话。大部分美国的投资者都认为OTCBB里的企业资质相比是低劣的,投资风险很大。OTCBB是一个不受监管的股票交易市场,大部分机构投资者都被禁止购买这个板块的股票。

    一般来说,在OCTBB上市和反向收购的最大赢家是财务顾问,律师和会计师。他们从中获得的中介费和服务费就超过一百万美元。除了现金收入以外,他们还会在交易中获得大量的认股权证,给公司上市后的股票价格造成极大的下行压力。

    从我以往的经验看来,大部分中国中小民营企业在OTCBB 上市或者反向收购都不是一个明智的选择。这些交易已经给许多优秀的中小企业带来非常大的危害。作为一个美国人,我对OTCBB成为无数中国优秀民营企业的葬身之地深感惭愧。其实,我成立中国首创投资的初衷是要帮助一位江西老板募集股权资金去扩张企业,并非是在OTCBB上市。我们为老板筹集的资金使企业的规模翻了两番,企业老板现在正和一家知名的国际投资银行合作,计划明年在香港上市,获得比OTCBB上市十倍以上的估值。

    通常,在OTCBB上市的企业都是那些没收入没利润的企业。即使一个优秀的中国企业在OTCBB上市,美国投资者也会对这家企业持怀疑的态度。虽然这不完全对也不公平,但在美国,企业老板选择在OTCBB上市就意味着企业有欺骗投资者的嫌疑。这就是为什么中国企业在OTCBB上市获得的估值那么低,有时候甚至还不及比企业今年的利润总额。

    尽管如此,2010年还是有超过一百家中国企业在OTCBB上市或者是进行了反向收购。这些交易使很多人成为了富翁,但很可惜,企业老板和投资者并不在此列。因为OTCBB上市和反向交易可以避开美国的监管赚取大量的服务费,中国的财务顾问和律师一直在恿这些交易,他们才是这里面的大赢家。

    但是这种看起来简单赚钱的交易方式可能会逐渐修正。美国政府现在已经开始评估OTCBB和反向收购给中国中小企业带来的危害。

    华尔街日报最新发表了一篇关于美国证券交易委员会SEC关于整顿中国企业反向收购交易的文章。美国SEC已经对协助中国企业进行反向收购的会计师和师律师介入全面的调查。

    此外,为了保护美国投资者,美国国会也正在考虑对反向收购和OTCBB上市程序举行听证会,他们发现几家OTCBB上市的中国企业都存在财务欺诈行为。

    倘若美国SEC行动起来,最大的受益者是中国民营企业家。只有美国政府使中国企业在OTCBB上市和反向收购变得愈发困难,这些企业家才会开始考虑通过更正规和成功的途径上市,例如在国内得到证监会的批准上市。

    推崇OTCBB上市和反向收购的财务顾问经常会说这是最快捷最简单的上市途径。他们是正确的,但是这也是因为缺乏监管才能更快更简单。换个角度来说,这也是使一个优秀的企业成为一个失败的上市公司最快最简单的的方法。

    事实上,无论在美国中国还是香港股票交易市场,都不存在一条让中国企业成为成功上市公司的捷径。

     

     

    .



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 04 7:59 AM | Link | 1 Comment
  • Is This The Greenest and Maybe Cleanest Vehicle on the Road

    Is this the zero-emissions green vehicle of the future? For the masses, possibly not.  For me personally, maybe so. It’s a battery-powered electric scooter, with solar panels for recharging during daylight hours.

    I’ve become a big fan, and a minor authority, on battery-powered electric scooters. I’ve owned a few. A Chinese-made electric scooter was my primary form of urban transportation while living and working in Los Angeles until moving to China last year.

    Though I never saw another one on the road in LA, I’m a passionate believer in this mode of transport. In China, electric scooters are almost as common as passenger cars, with upwards of five million sold every year. The streets and sidewalks are crowded with them. They run on lead acid batteries, the same kind used in car batteries.

    The electric scooters sold now in China rely on plug-in battery rechargers. That’s the biggest drawback of driving one. Lead acid batteries can take up to eight hours to recharge. This new solar-powered recharger should solve that problem. The battery recharges automatically as you ride around, as long as there’s sunlight. Assuming the solar recharger works, this electric scooter becomes a street-legal perpetual motion machine, never needing, at least during daytime, to stop for a recharge.

    I met the inventor, Zhao Weiping, at a trade exhibition. I could barely contain my excitement. We discussed the science, the capacity of the solar panels, and the potential to upgrade the batteries to lighter, longer-lasting lithium batteries. He’s only built prototypes so far. He expects the cost, for a base model, to be around Rmb3,000 ($440).

    With lithium batteries, the price goes up to around $750. Lithium batteries take half the time to recharge.

    Another benefit of lithium: the batteries weigh less than half lead acid ones. Less weight means less drag and so farther range on a full battery and faster top speeds.  Engineer Zhao guesses top speed should be about 50kph (30mph) compared to 30kph (18mph) for lead acid models.

    To me, it sounds like the ideal form urban transport: zero emissions, reliable, fast enough to keep up with traffic, and will rarely, if ever, require mains electricity to recharge. In other words, zero cost per kilometer traveled.

    It gets better: in much of the US, including California, you don’t need a driver’s license or insurance to drive an electric scooter, and you can drive it legally in bicycle lanes. Of course, few traffic cops know any of these facts. I was pulled over routinely in California, while riding my electric scooter. Eventually, I created a plastic-coated car card with all the relevant clauses of the state traffic code. I’d present it to traffic police, and they’d usually let me head off after a few minutes.

    In LA, I drove a Chinese electric scooter upgraded with lithium. Top speed was about 24 mph. Recharging time: four to five hours. As commutes go, my 9-mile trip to work was about as pleasant and relaxing as any could be. Most of my route was along the Pacific Ocean, and then through some of the hipper areas of Santa Monica and Venice. When the roads were crowded at rush hour, I’d switch into the bicycle lane. You can park anywhere on the sidewalk, just like a bicycle.

    The biggest hazard is pedestrians. The scooters are so quiet that people don’t hear it coming. I had a few near misses.

    I never understood why so few in California rides electric scooters. California is certainly one of the most environmentally-conscious places on earth. Motorized transport doesn’t get any greener than electric scooters. Zero emissions, zero fossil fuels, zero direct carbon footprint.

    Those green credentials were never my main reasons for riding an electric scooter. I liked the convenience, the tranquility, the absence of traffic and the sheer exhilaration of riding it.

    Exhilaration, however, is instantly transformed into despair when your battery runs out of juice.  It happened to me a few times, when I miscalculated the range. Open throttle riding, going uphill, lots of stops and starts can all drain the battery rather quickly. The meter showing battery life is, at best, unreliable. When the battery is empty, the scooter will shudder once, then conk out completely.

    Run out of fuel with an internal combustion engine, you call the AAA or find a gas station. Run out of electricity with an electric scooter and your only real choice is to push the vehicle home for recharge. I’ve had to do it more than once. It sucks.

    Engineer Zhao’s solar-powered recharger should make that problem less common, if not eliminate it altogether. At worst, if the battery empties, you park it and in daytime, come back in a few hours and drive it away. Limitless range should make for limitless enjoyment.

    Yes, but will Engineer Zhao’s machine work? Talking with him, it’s hard not to be confident it will. The solar panels are powerful enough to keep the batteries recharged and light enough not to create a lot of extra drag. The only way to find out, of course, is to get one. I’m thinking now of commissioning Engineer Zhao to build me one, with lithium batteries.

    If it works, I’ll help Engineer Zhao get venture capital funding to build his company. My gut tells me I’m not the only one who’d ride around on one, and that there could be a very big market in the US, Europe and China for this solar-charged scooter.

    I don’t particularly relish the idea of driving any sort of vehicle on Shenzhen’s streets. Driving is chaotic. Accidents common. Pollution awful. There are no bicycle lanes. But, I’m prepared to put my money – and perhaps my health – on the line to prove this is a vehicle with a future and perhaps even a mass market.

    Wish me luck.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 28 6:35 AM | Link | Comment!
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