Archive for May, 2008

May 10 2008

private equity and venture capital in china

Published by T Chow under Business, China, Investment

Review time again as usual. Most interesting business article for the week comes from Seeking Alpha entitled “Progress or Pipe Dreams? Private Equity / Venture Capital in China.” ( h/t to China Law Blog) Well, its not really an article: it is a panel discussion from some people who know the industry better than most others. Here is what Dan Harris at China Law Blog said:

Project Alpha just posted the transcript from a very enlightening panel discussion on private equity/venture capital in China. The discussion was at JP Morgan’s recent China conference in Beijing. I attended this discussion and found it very informative.

Shaun Rein (Managing Director, China Market Research Group) did an excellent job moderating the discussion between Robert Theleen (CEO, ChinaVest); Joel Kellman (Managing Partner, Granite Global Ventures), and Brandon Lin (Partner, SAIF Partners).

If Dan thinks its a must-read, it probably is. Here are some excerpts I found interesting from the discussion:

Bob Theleen: At local, municipal and regional level, government is very much supportive of the PE industry. At national level things become more complex for the reasons you mention.

On the other hand the contradiction is there is not a mayor or a governor that I have ever met that does not say, my city needs capital; it needs growth capital and I want to support local entrepreneurs. Since the covenant of Beijing with regional government is you are more on your own, that regional government has to fend for itself. I think you will find that contradiction, that Beijing has to accommodate local government and it has to accommodate and support the PE industry, but how do you separate that out from issues like controlling the aggregate capital in a high-inflation market? That is a problem that China faces.

* * *

Shaun Rein: Is it hard right now for entrepreneurs to get capital?

Bob Theleen: I think it is very hard. It is harder because of credit tightening.

The good news is that our regional city banks are providing more and more debt. The aggregate savings of China, pools of RMB are accessible today through trust companies, through other financing sources. But that is an important component of making all of those kinds of business strategies effective.

Good stuff and worth a read. It reads pretty quickly.

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May 09 2008

food exports to japan drop and china has no one to blame

Published by T Chow under Business, China, Products

CNN World Business ran an article this past week that states that food exports have dropped by 30% to Japan, which is a key market for Chinese food products.  I am not sure that I actually feel too badly for China in this case, but let me explain after the article:

China’s food exports to Japan, a key market, plunged 30 percent in February, hurt by a scare over poisoned Chinese-made dumplings, according to data reported Friday.

Japan is the third-largest market for Chinese exporters of fish, dumplings and other processed food, and the drop in sales is a severe blow to the fast-growing industry.

China’s food exports to Japan in February totaled 186,000 tons, down 30 percent from the same month in 2007, the General Administration of Customs reported.

Exports from Shandong, the eastern province that is the base for food processors serving Japan, fell 60 percent, the official Xinhua News Agency said.

“Influenced by such things as the `poisoned dumpling incident,’ our country’s food exports to Japan fell one after the other,” said a customs agency statement.

Chinese-made dumplings were pulled from Japanese supermarkets in December after traces of a banned insecticide were found in the dumplings and in the vomit of people who fell ill after eating them.

Bad Chinese products are nothing new.  And it is not all too surprising considering that China is become the world’s manufacturer, not just America’s sourcing base.  And as expected, there are issues of quality fade, lack of quality control, and lack of repeat due diligence.  So sometimes I actually think its a miracle that there aren’t more Chinese products issues on a regular basis.  Thankfully, most issues are not lethal, like the glycerin that Panama bought some time back for cough syrup.

But why do I say that China has no one to blame but itself?  Because it often takes the stance that it’s importing country’s responsibility to check out product issues, not the exporter’s.  The Chinese SFDA did that when it came with pharmaceuticals here (and I covered this topic in this post):

But the SFDA said that based on international practice, “safeguarding the legality, safety and quality of raw materials imported for use in pharmaceuticals is the responsibility of the importing country.”

This was the official policy regarding pharmaceuticals, so I know it’s not quite the same thing.  But it is my belief that this has been China’s stance toward food and other exported products as well.  Here was China’s response:

Chinese authorities say their investigation has found the poisoning probably was an isolated, deliberate case. They say there is little chance it happened in China and have accused Japanese police of failing to cooperate with them.

Sure, but if China is trying to implement domestic food safety standards, then it must know that there are food export issues as well.  As long as the government refuses to tackle this issue head on, and expend some serious capital and resources to deal with it, then China really has no one to blame if Japan or other countries decide to start consuming less food products from China.  That’s pretty logical actually.  And I am not trying to be cruel.  In the end, China can only blame itself if the market for Chinese exports, particularly food exports, drops.

This is a good opportunity for the government to get involved in regulating its exports.  It doesn’t need to massively regulate.  But more regulation, though costly, will be welcome.  And ultimately, it may cost China less if other countries can learn to trust Chinese exports again.

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May 09 2008

international m&a symposium, 6/17-18

Published by T Chow under China, Law

The Institute for International and Comparative Law is hosting their Annual Symposium: International Mergers & Acquisitions - Strategies and Trends. This two day program takes place in Plano, Texas, on June 17-18. Both days are packed with programs, as can be seen here. Of particular note are some of the sessions, which cover a lot of topics:

A Case Study of a Cross-Border M&A (3 parts and nearly all of one day to present!)

Practical Problems and Guidance for a Cross Border M&A

Best Practices and Worst Mistakes Made by Foreigners in Brazil, India, Russia, U.S. and Venezuela

General Counsels’ Roundtable on M&A Issues

Pitfalls and Disputes in Multi-Jurisdictional M&A Transaction

You can even register online here.

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May 08 2008

what’s good for the rule is law is good for chinese litigators

Published by T Chow under China, IP, Law, Litigation

I have been hammering the fact that Chinese IPR enforcement–the protection of various sorts of intellectual property like patents and trademarks–has been getting better and better.  Statistics are powerful, and I don’t think these are any different.  The Economist recently did an article called “850,000 lawsuits in the Making” ( h/t Rich Brubaker at All Roads), which reads:

Since 2003 the number of trademark applications has grown by 60%; the number of patents has nearly doubled (850,000 are now active) and the number of lawsuits about intellectual property has more than doubled (see chart). The government is encouraging the trend in many ways, including signalling to the press to cheer it on.

This enthusiasm marks a dramatic change. During the Maoist era, private property of any kind was seen as theft from the masses, and so subject to just expropriation. Only in 1985 did China begin to enact laws to protect patents. It did not enforce them much until 2001, when the authorities promised to crack down in order to win admission to the World Trade Organisation.

China has since opened more than 50 courts that deal solely with intellectual-property cases, and Chinese firms are using them. Prominent litigants include a pram manufacturer protecting designs, a soya-milk producer defending an industrial process and a maker of Chinese medicines shielding a name that, roughly translated, means “mind and blood purge”.

Again, very encouraging numbers.  50 specialty courts that deal with IP?  That’s fantastic.  Sure, they are not all up to par with the Federal Circuit Court of Appeals, but I cannot complain.  Chinese judiciary specializing in IP and learning how to deal with these sorts of cases is a good thing.

As companies in China establish brands and develop products, the incentive to sue will grow, particularly because the cost of bringing a case is minimal. “If you can afford a car, you can afford a lawsuit,” says Tony Chen, who works in the Shanghai office of Jones Day, an international law firm.

In America, firms often settle intellectual-property cases out of court for fear of enormous awards by juries. That is not true in China, Mr Chen says, where a judge rules in the majority of cases and damages tend to be small. They normally cover legal costs, however, turning lawsuits into a self-funding method to battle piracy.

Well, perhaps there is an argument to be made for the British system…  that being a tangent, the British winner-takes-all approach will only allow the rule of law to grow in the early stages of IPR enforcement.  Maybe later it can hurt, but for now, including damages into legal costs will encourage more and more companies to turn to the courts for IP remedies.  That is a good thing.  Few things encourage the rule of law such as the general citizenship of a country embracing lawsuits.  And if Chinese companies can embrace them wholeheartedly, then perhaps the Chinese people will finally be able to as well.

Unsurprisingly, the main beneficiaries of the sudden interest in intellectual property are Chinese lawyers. Some reportedly earn more than $5m a year. Non-Chinese law firms sometimes provide advice on thorny cases. But they are not allowed to file patents or appear in court on behalf of a client—a proprietary process that Chinese lawyers are keen to defend.

Yes, there is a silver lining in the advancement of the rule of law: it’s that the lawyers profit most.  I guess I can’t complain.  But yes, someone will have to profit off of this sort of growth.  For most people, that’s an unfortunate fact.  But it’s a fact of life.  The more that law becomes integral to Chinese society, the more lawyers will become more important.  That’s an already established fact in America–much as lawyers are hated, they are also necessary to the functioning of everyday business.  Expect the same in China.

So onward rule of law!  Just make sure your coattails are long enough for the lawyers…

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May 07 2008

networking for law students 201 - blogging

Published by T Chow under Career advice, Law, Technology

This is sort of a follow up on my previous post about networking tips for law students (see here), hence the title, but also in response to the fact that blogging made the cover of the California Lawyer Magazine this month. I found the main article to be a re-hash of most such articles because of the content:

  • lawyer blogging is booming (a 3500% jump in 5 years, which is no surprise)
  • attorneys have many reasons to blog: to build a reputation in a specialty, attract clients, monitoring a legal niche, starting a conversation with a community of interest, etc. (common sense, no surprise again)
  • the downside of blogging (lawyers are often technophobes and trolls are annoying, nothing new)
  • future of blogging (no real information, just some pretty lame speculation)

However, the magazine provided 7 tips for blogging. Since I had counseled law students to learn about blogging and start their own blogs (or join the staff of a blog which has multiple authors like Transnational Law Blog), I thought I would put up some excerpts of the tips:

1. THINK GLOBALLY
In blogging, even though it feels like you’re sharing your thoughts with an intimate circle of friends, remember that millions of Internet users around the world will be able to read-and react to-what you’ve written.

This is even more important if you are taking on an international niche–then you really do need to think globally.

2. MANAGE YOUR READING REQUIREMENTS
Everyone already has too much to read, and the popularity of blogs is an added burden. But to be a well-regarded blogger, you really need to keep up with what fellow bloggers are saying. “Blogs act as funnels,” says Kevin O’Keefe, president of Seattle consulting firm LexBlog. “It’s like you have an intelligence agent that puts things in perspective for you.”

It is possible to follow a dozen or two dozen blogs without taking too much time if you have RSS or a standard bookmark list that you check once or twice a day. No need to keep on reading a blog over and over because there will be new stuff eventually.

3. KEEP IT CIVIL
If you wind up in a heated online spat but aren’t familiar with the tone and behavior expected in the blogosphere, resist the urge to respond immediately.

4. JOIN THE CONVERSATION (BUT IGNORE THE TROLLS)
When someone blogs misinformation about you, your firm, or an issue you are involved in, you should go ahead and set the record straight online. “The remedy for false speech is more speech,” says JoAnne Speers, executive director and ethics program director of the Institute for Local Government in Sacramento.  However, if you encounter a rabid, screaming, and pertinacious blogger-often referred to as a troll-you might want to hang back.

Just common sense, though I slightly disagree with #4. One thing is that when “trolls” abound, in general, just let them be. That usually works well. It’s the debate that will keep them coming back. No debate, moderate their comments, and you will be just fine.

5. FOLLOW OFFLINE RULES ONLINE
For the most part, you can avoid getting in hot water while blogging. “Use the same standard of ethics and decorum that applies to any medium,” including a person-to-person conversation, Speers advises.

Remember you are a professional. If you are a to-be lawyer, what you say will be remembered by the lawyer blog community. It’s a small community. So be professional always.

6. ABANDON ANONYMITY
Although it may be tempting to launch an anonymous blog in which you can speak freely, keep in mind that anonymous bloggers rarely stay anonymous. “Eventually, you are going to get found out,” says Kristie D. Prinz, founder of the California Biotech Law Blog. Howell agrees. “It’s not that difficult to figure out who someone is,” she says. Just ask Rick Frenkel, a lawyer at Cisco Systems. Shortly after his anonymous blog-Patent Troll Tracker-was outed this year, two Texas patent attorneys sued Frenkel and Cisco for defamation. Cisco has since revised its blog policy.

As a law student, I think this is a definite must. You need to be known in the community, and anonymity will hurt you. Of course, this assumes you are writing an informative blog and not something like Anonymous Lawyer (by Jeremy Blachman I believe).

7. SPEAK FOR YOURSELF
A blog is not the place for corporate blather or marketing blasts-it’s a place of personality. Keep that in mind as you write, suggests J. Craig Williams, a Newport Beachbased litigator. “Blogging by committee is bland and dry,” he says. “What makes blogging successful is voice. The most important thing is to be yourself.”

I also disagree with #7. Some blogs do it quite well, so I don’t think that’s a reason to stay away from group blogs. You can still develop your personal voice in a committee blog, especially when your partners aren’t going to heavily edit your work.

I hope this helps!

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May 07 2008

the 2nd annual asia pacific m&a summit, 6/3

Published by T Chow under China, Other Good Blogs

From China Law & Practice’s website, Asia Law & Practice is hosting an Asia Pacific Mergers & Acquisitions Summit in Hong Kong on 6/3/2008. Their description of the event:

This top-level business symposium will feature open discussion and expert advice on the key regional and cross-border M&A issues in Asia. The Asia Pacific M&A Summit will bring together over 200 of the top corporate legal counsel and business leaders. They represent some of the largest and most active companies from across Asia and beyond – companies and individuals who are key clients of leading legal advisers.

Should prove fascinating because I wonder if they will cover reverse M&A into America, which is technically a Pacific Rim practice.

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May 06 2008

faltering US economy = great opportunity for chinese

Published by T Chow under Business, China, Investment

The Los Angeles Times recently published an article entitled “Chinese Firms Bargain Hunting in U.S.” ( h/t to CDT).  Ironically, I had just posted an article recently about western companies going into China because the U.S. economy was faltering.  ( here)  And while I had also written about China’s growing economic muscle ( here), the LA Times article puts two and two together: Chinese companies are setting up shop in the U.S. because it is actually cheaper or almost cheaper to set up shop here.  Scary thought.  But the more the west goes to China and drives up costs (particularly raw materials and HR costs), the more that China might be tempted to bring more of that capital here.

Here are excerpts of the article:

Liu Keli couldn’t tell you much about South Carolina, not even where it is in the United States. It’s as obscure to him as his home region, Shanxi province, is to most Americans.

But Liu is investing $10 million in the Palmetto State, building a printing-plate factory that will open this fall and hire 120 workers. His main aim is to tap the large American market, but when his finance staff penciled out the costs, he was stunned to learn how they compared with those in China.

Liu spent about $500,000 for seven acres in Spartanburg — less than one-fourth what it would cost to buy the same amount of land in Dongguan, a city in southeast China where he runs three plants. U.S. electricity rates are about 75% lower, and in South Carolina, Liu doesn’t have to put up with frequent blackouts.

About the only major thing that’s more expensive in Spartanburg is labor. Liu is looking to offer $12 to $13 an hour there, versus about $2 an hour in Dongguan, not including room and board. But Liu expects to offset some of the higher labor costs with a payroll tax credit of $1,500 per employee from South Carolina.

Liu is part of a growing wave of Chinese entrepreneurs expanding into the U.S. From Spartanburg to Los Angeles they are building factories, buying companies and investing in business and real estate.

For years, investment between the U.S. and China flowed one way, with American firms spending billions in the Asian nation. But the Beijing government’s $5-billion stake in Morgan Stanley and $3-billion investment in the private equity firm Blackstone Group brought China’s overall investments in U.S. firms to $9.8 billion in 2007, up from $36 million the year before, according to Thomson Financial.

“It’s a lot of pressure going to the largest market in the world,” Liu said. But he thinks it’s certain to help his business become more competitive. “That’s one of the real benefits from this expansion.”

(emphasis added in bold)  We all know that the dollar has been weakening and that international players are finding bargains here.  It’s just an interesting surprise to discover its not just the CNOOC’s and the Blackstone’s that are coming to the west–it’s even smaller Chinese operations quietly coming in. It isn’t terribly surprising once I think about it a little–because it does make a lot of sense.  It’s just that I wouldn’t normally put two and two together in this sort of way.

What does this mean for corporate attorneys?  Or more specifically, for U.S. corporate attorneys?  The large M&A market is sputtering in the U.S. according to a recent article in the Recorder.  ( here, subscription required)  However, the mid-level deals are still alive and kicking according to the article.  These Chinese businessmen bringing business to the U.S. will be mid-level deals at best.  And more likely, need corporate attorneys who can help them set up shop: entity formation, real estate transactions, employment agreements.  In other words, basic corporate lawyers.  This is a bit of good news in a rather slow economy.

And for those M&A, LBO, and structured finance folks who are out of work with the spate of layoffs, maybe its a good time to do entity formation work.  Here’s a start for retraining:

whither the c-corp, s-corp, llc, lp, etc.?

Maybe I will get around to doing that analysis of different U.S. corporate entity types once my work slows down.

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May 04 2008

what is chinese culture becoming in a global village?

Published by T Chow under Uncategorized

Okay, I know this is controversial…  My blog says that I comment on law, business, society, and of course, anything else interesting.  Anyone following these blogs can quickly tell I normally talk law and business, and rarely about anything else.  (maybe some American politics once or twice)  But Chinese society is something I rarely talk about.  Frankly, it is hard to do in an objective way.  I was a sociologist in college, and I disliked a lot of the biased sociologists back then as well.

Well, California Magazine (the alumni magazine of UC Berkeley) recently did a cover on China with the Olympics coming up.  There is an interesting article called “The Great Leap Nowhere” (credit to my Chinese lawyer friend at Boalt), which argues that Chinese “culture” is becoming more and more amorphous.  I am not terribly surprised because globalism, with international media, pop culture, music, movies, etc., seems to bring more conformity in terms of culture.  Here are some excerpts from the article:

The Chinese are not polled about feelings of national identity; such questions, much less their answers, would too dangerously approach the political nerve of China’s ruling mandarins. Polling on other issues, however—tastes in carbonated drinks, preferences for shampoos, ratings of certain sports celebrities, the appeal of mobile phone designs—is commonplace and, in a real way, reflects a changing social landscape. Despite the lack of significant data, after many years in China I am most acutely struck by China’s confusion over what, in the end, it means to be Chinese.

The rapidly shifting cultural footing is nowhere more apparent than for China’s urban 20-somethings. Take, for example, Yang Ling, as I will call her. Born in Xian to a military family—her father retired before reaching the rank of general—she chose, perhaps as a dutiful Chinese daughter, to attend a local university rather than a more prestigious institution in Beijing or Shanghai, so that she could be close to her recently divorced mother. “Now I realize I probably made a mistake,” says Yang, a petite woman of 27 who sports radically fashioned bobbed hair and, she confides, a splendid polychromatic butterfly tattoo on her shoulder. “Chinese children are supposed to take care of their parents and I thought it was the thing to do. But now I think I should have gone to Beijing.”

For her fealty, or perhaps because of her family background, she was invited to join the Communist Party but never did. “I just forgot to fill out the paperwork,” she recounts. “It wasn’t important to me. There were other things in my life that mattered more.” For hundreds of thousands of young people like Yang who have migrated to Beijing for professional reasons, the Party is no longer meaningful. “I’m not even sure I know anybody in the Party,” she says. “What’s the point? How does it help you? It’s just ancient history.”

Yet it is true that for up-and-coming 20- and 30-somethings in a cosseted and increasingly international metropolis such as Beijing, Shanghai, or Guangzhou, all history is ancient, and largely irrelevant. Yang Ling sped from provincial Xian after college to Beijing, where she worked as a marketing consultant before founding her own consultancy targeting medium-sized Chinese companies. For her, there is little about China’s history or culture that is either particularly appealing or necessary except, perhaps, the multiplicities of Chinese cuisine. She and other young Chinese live their lives in a world that would fit as easily in Europe or America, a world that is ultimately more recognizable as Western than Chinese.

For most Beijingers, the rhythms of daily life have been inexorably recast by the modern, largely Western economy that undergirds China’s astonishing growth. Consider “Tang Wenhai,” a 40ish director of corporate communications for one of the capital’s largest commercial and residential developers. Because her husband travels extensively for work, as does she, their son boards during the week at an elite primary school. Every morning Tang leaves her utterly modern 22nd floor apartment just off the Fourth Ring Road and drives her gleaming white Honda to an office in a gray, crystalline trapezoidal tower in the CBD. With an MBA from Tsinghua University (”China’s MIT”), she worked on her company’s recent $1.5 billion initial public offering, jetting around the globe with other senior company officers and their investment banking consultants. She’s taken her staff on whirlwind tours of Europe, and most recently vacationed in Egypt with friends.

“Of course this isn’t how my parents live,” she laughs, “or frankly how I thought I would live when I was growing up. My parents”—working-class people from China’s far northeast—”could never have imagined a China like this. The funny thing is, now we live like everyone else in the world.” Or at least like other First World corporate executives. “It’s globalization,” she says.

The article notes, to its credit, that much of the analysis does not apply in the rural areas of China.  But is this really all that different from what has happened in places like Tokyo or Seoul?  Those are metropolitan areas that are reminiscent of western cities as well.  Tall buildings, flashing lights–very New York-ish.

This is not a critique necessarily on Chinese culture.  It is, however, a warning that the global economy–and its attendant culture–does threaten any country’s native culture.  China is not exempted from this either.  Not exactly rocket science, but still makes for an interesting read.

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May 02 2008

china = the dominant superpower by 2015?

Published by T Chow under Business, China

CNN Money ran an article the other day with a title that made me want to read it: “You Have 7 Years to Learn Mandarin”. Oh really? Why so you might ask? My original thinking is because the Chinese business (and therefore legal) market would become too saturated with ex-pats and half-pats to break in. I was wrong. Instead, the article talks about a prediction that China will be the world’s economic superpower by… 2015. 2015? You got to be joking. But that’s what CNN is peddling to an unsuspecting public:

Back in 2001 when the International Olympic Committee chose Beijing as the site of this summer’s games, the event was meant to mark China’s debut as a player on the global economic stage. But a recent study by the economist Angus Maddison projects that China will become the world’s dominant economic superpower much sooner than expected - not in 2050, but in 2015.

While short-term investors are already cashing in on China’s growth by playing the global commodities boom, smart long-term thinkers are contemplating what happens when China matures from an exporter of cheap goods to a competitor in sectors where the U.S. is dominant - technology, brand building, finance. China has almost wiped U.S. makers of low-value items like toys and socks, but by 2015 it may threaten Apple (AAPL, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and Procter & Gamble (PG, Fortune 500). It will increasingly influence the S&P 500 and the mutual funds in our 401(k)s. So it’s worth looking at how that will happen, what it means, and what anyone can do in the seven years before the baton is passed.

Just using the exchange rate to convert China’s GDP into dollars isn’t helpful in comparing the two economies, because China controls its exchange rate; by that method, China’s economy might not pass America’s for decades. Exchange rates apply only to tradable products and services; they aren’t very useful in valuing nontradable goods in a country like China that is much poorer than the United States. So we need some way to compare the real value of China’s economic output with America’s, and economists have developed one. It is called purchasing power parity.

Angus Maddison’s forecast (which uses purchasing power parity) isn’t built on outlandish assumptions. He assumes China’s growth will slow way down year by year, and America’s will average about 2.6% annually, which seems reasonable. But because China has grown so stupendously during the past decade, it should still be able to take the crown in just seven more years.

If that happens, America will close out a 125-year run as the No. 1 economy. We assumed the title in 1890 from - guess who. Britain? France? No. The world’s largest economy until 1890 was China’s. That’s why Maddison says he expects China to “resume its natural role as the world’s largest economy by 2015.” That scenario makes sense.

China was the largest economy for centuries because everyone had the same type of economy - subsistence - and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs.

Where do I even begin? I think the 2015 number is built on a number that heavily favors anyone who wants to make grand declarations about China catching up quickly. In fact, last I remember, when Rich Brubaker at All Roads posted that China would catch up by 2028, we all took that number with quite a bit of skepticism. Sure, you can choose one particular figure to represent your claim? But this sort of economics… well, it seems more sensationalistic to me than realistic. Nor will it reflect reality. I doubt in 7 years that value-added industries, the service professions, will be ceded over to China. Hardly–that’s exactly what the U.S., EU, and other Asian Tigers will try to specialize in. So I think the 2015 stats were more shock value than anything else.

I also doubt that China have companies that can play along to the tune of Apple or JP Morgan. Or even Samsung. Not that China doesn’t have some successful companies, or some that have catchet like Lenovo. (okay, Lenovo didn’t have it… they bought it from IBM when they took over the Thinkpad series, which had serious cachet) The Chinese economy isn’t built on innovation and product advancement in the same way that other economies are. The educational system doesn’t embrace such thinking yet. So I doubt that we’ll see that. We will see SOE’s flexing their muscles more. I expect that. But I really don’t think a Chinese computer company will over take Apple in terms of computer and culture maker. Not by 2015.

The global economy is not a subsistence economy. It’s different. It’s more like a pyramid scheme in terms of value added industries. There is a reason why the west dominates in consulting still–because white collar professions, which are services and about “value”, have existed far longer there than in China. And it will be that pyramid for some time still, I am not saying that the Chinese services industry and other higher food chain type businesses won’t evolve. They will. They just won’t overtake the world by 2015.

I think that’s where the conclusion of the CNN Money article is going:

For companies: Focus on getting better at your highest-value activities. Just because the Chinese will be fighting you in the same industries doesn’t mean you’ll lose.

For individuals: You can avoid competition with Chinese workers by doing place-based work, which ranges in value from highly skilled (emergency-room surgery) to menial (pouring concrete). But the many people who do information-based work, which is most subject to competition, will have to get dramatically better to be worth what they cost.

I agree with the advice for companies. It’s a global food chain or pyramid more than a subsistence economy. I disagree slightly for individuals. Why? Because I don’t think information services will require that the west gets dramatically better. It just needs to stay a few steps ahead.

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