Paul Denlinger

Reports Indicate China's Ecosystem Is Too Far Gone to Support a Growing Economy

oneolddude: Has it occurred to you that the difference between China and the US is that China has 4 times the population and only 17% arable land?

And you say that "China will do the same?" Try explaining your logic to China's leaders today. They are not cool about the situation.

Get real.

China's Internet User Base Is Growing Faster Than Mobile

The mobile phone has grown faster in China, at least initially, because voice was the communications method of choice for many non-technical buyers. Everyone was familiar with the phone interface; only office workers and government workers were the first ones familiar with Windows. Over the past ten years, that base has expanded exponentially to the rest of the population, and there are Internet cafes to be found in every Chinese city and village. Now, DSL is being made more affordable for homes. Many Chinese parents, for example, would prefer that their child access the Internet from home than from Internet cafes, which have a bad reputation.
The comparison between mobile and Internet communications will soon be rendered moot as the two merge, as they have on the iPhone platform. It is estimated that there are about 800K cracked iPhones in use in China. Although the iPhone is a niche device now, it would be safe to say that Apple will come out with cheaper models in the future, and other companies, such as Nokia, will also abandon WAP as 3G gets rolled out in China. Eventually, mobile and the Internet will be one and the same, and the comparisons will be completely dated. If you come to Shanghai and Beijing and just walk around, you will see that that is already taking place.

China: American-style vs Latin-American-style Crises

Another data point is the fact that Shanghai Vanke is lowering prices on Shanghai real estate:
www.chinavortex.com/20.../

And that Alibaba's Jack Ma is taking a very pessimistic tone:
www.chinavortex.com/20.../

E-tailing: Report Out on E-Commerce in China

Thanks for pointing out these issues.

It would be really good if market research organizations offered a higher degree of clarity and granularity re reports on the Chinese Internet, and even better if reports were attributed to individuals who are willing to stand behind the methods and data. While various sources support the general upward trend, it would be better if this could be supported by reliable data.

With China's very solid Internet growth, market research firms in the country can afford to do better, and should do better. This would help to bridge the gap of understanding between China and the rest of the world.

A U.S./China Comparison

I spend about 80% of my time in China, and while China has done well so far, it has been because China's economic development so far has been relatively easy. Take strong government control, add foreign investment, get government out of most peoples' lives, and let it grow.

The next stage of growth though will be much more difficult. There are signs that the natives (Chinese population) are getting restless. The environment has been horribly degraded, making many cities barely liveable. China has invested in a transport infrastructure based on cheap coal and oil which was copied from the US in the nineties.

Yes, China has done very well so far, but just as recent events in the US over the past year have shown us, things can turn south very fast, even for the healthiest looking countries.

On China and What the World Won’t See During the Olympics

Thanks for talking about the very real challenges which China faces. Some Chinese officials have a saying: "If China reforms too fast, China will become chaotic. If it reforms too slow, it will die."
The reforms have created huge wealth, but there are severe prices for this prosperity. Now they are becoming more apparent.

China's Impending Financial Crisis

Everything points to the Chinese government not having acted fast/hard enough to stem the capital inflows, and the recent oil price rise and capital inflow restrictions almost seem like panic reactions.

The picture I get is that there will be major steady rises in all commodities, especially food, and price stagnation in real estate. Already there is major pressure on RE developers in China, who are having to live with increasing interest rates and a public which is becoming more wary about investing in housing in the face of rising prices across the board.

In the face of this, it may even become likely that the Chinese government will come down hard on "speculators" who play the yuan rise. The purpose would be to make an example of them and discourage the practice.

Has Google Failed in China?

I agree.

Baidu's greatest danger is that it has to dance to Wall Street every quarter; Google has enough money in the bank that it really doesn't have to.

Another danger is Baidu's reseller policy for ads, which opens it up wide to abuse. This policy provides short-term revenue growth, but hurts its long-term credibility. It would be comparatively easy for a Chinese version of Google Adwords and Adsense to undermine this once all the pieces, including people, are in place.

Investing In China's Online Gaming Sector

I did not single out Shanda for criticism, I directed my criticism to the whole sector. I reaffirm my opinion that all gaming companies are overly risky businesses and guarantee stable growth, especially when there is more steady growth and return in the A-shares market.

As a matter of fact, I have stopped following the online gaming companies just for this reason.

And for your information, I was in involved in arranging Shanda's seed-round funding.

请你先看清楚再作评论。

Paul Denlinger

Investing In China's Online Gaming Sector

When a retail investor invests in a Chinese game developer and distributor, they are essentially investing in the management's ability to develop and/or distribute a hit game title. This story made a lot of sense when Shanda went public in 2004, but in 2007, it makes no sense because it is too risky and time-sensitive.

With the rapid rise of China's domestic A-share market in 2006, one can make MUCH better returns on a steady basis, with a lot less risk than the online gaming market.

TOM Online Must Focus on Products: Connections Don't Ensure Success

Taobao's biggest advantage is that it is run by Chinese and serves the Chinese market from China. Large American corporations have a hard time accepting this simple and basic truth. From their US HQ, it is hard to understand why other markets, even one as big as China, should develop any differently from the US market.

Add to that virtually all of the management people in the US don't know Chinese, and don't know enough to hand it off to people who do know Chinese. It is worth noting that most American corporations, until very recently, have put no added value on foreign work experience and linguistic knowledge.

And when they fail, they inevitably blame the Chinese market, saying that they lack connections. "This proves that the Chinese market is biased against western corporation," they inevitably proclaim in a loud chorus!

This is why many US corporations will continue to fail in China, and management in China will continue to localize. It isn't that the Chinese market is biased against western corporations; it's just that western companies which do not know Chinese and are not willing to learn from Chinese consumers have no value-added to offer in this growing market.

China's New Obsession with Blogs and How Companies Can Benefit

This report on the BBC website says that most bloggers write about personal experiences and technology. This also applies to Chinese bloggers, and explains why it is so difficult to monetize blogging from the advertisers' point of view. To read the article, visit: news.bbc.co.uk/2/hi/te...

China's New Obsession with Blogs and How Companies Can Benefit

The simple truth is that although blogs are an excellent media for communications, there is virtually no way for anyone, except for a few astute individuals, to monetize them. That has been the case in the US, and it is likely to repeat in China.

Since the commercialization of media is not as pervasive in China as in the US, there have been many disputes about who owns the revenue from advertising for the few popular blogs. This was why Xu Jinglei took her blog off the Sina network.

For the service providers who provide blogging tools, blogs provide valuable real estate which ads can be run on. The most outstanding success in this area has been Google's twin massive revenue-generating services, Adwords and Adsense. The winners are Sina, Sohu, Netease and Tencent. These companies are able to digest the huge ad budgets being thrown their way by ad agencies.

But ad agencies themselves are an old-world business whose revenue structure is under assault, as is attested to by WPP's Martin Sorrel in this quote: www.ft.com/cms/s/89c1d...

The simple fact is that the Internet is bound to change the rules, and that Google is the one company which is best positioned to lead: richardbrandt.blogs.co...

Because Baidu is perceived as a Chinese company and is protected by the Chinese government, in much the same way as Sina is, it will be a leader instead of Google.

Then, any ad buyer will have a full set of advertising and information tools at his fingertips, enabling him to make all of his ad buying decisions. There will no longer be any intermediaries. Read here: en.wikipedia.org/wiki/...