Is China a good place to invest?
This article was originally posted on TSI in 2011
Apple store opened in Lujiazui, Shanghai, in 2010
The answer could be intriguing. For the large- to small-companies, China has been a great place to invest thanks to lower wages. With huge population of China, most companies take advantage of their labor-intensive industry, typically manufacturing. Apple Computer assembles millions of iPhones in China and ship around the world. The company must have chosen China to assemble the most popular product, iPhone, because of the lower wages, the huge population, and the vast reasonable land.
Starbucks also has chosen China to be a strategic field to drive their revenues. The company now has slightly above 500 stores in China (as of 2011) and expects to increase its number to 1,500 by 2015. That means the number of stores will be tripled, implying that Starbucks’ revenues in China are going to be tripled.
I Starbucks everyday while I am in Shanghai. Around my home, there are three Starbucks stores and they are located within a quarter mile to each other. In the morning after 10:00, it is already hard for me to find a table to enjoy a cup of coffee. During lunch time, it is the best time to find a table, otherwise you will not find any tables available again till 5:00 in the afternoon. People go out for dinner so tables start to be vacant, but all tables are taken again after they finish their dinner around 7:00 in the evening to enjoy another cup of coffee and chatting loudly.
It seems Starbucks has successfully introduced coffee culture to China in past years while the Chinese, by the way, order mostly specialty coffees, like Mocha, Latte, and all-time-favorite Frappuccino. A Tall Mocha costs 28 yuan or US$4.35 (as of Aug. 15, 2011) in China while San Francisco, CA, currently costs $3.15.
Is the price of 28 yuan expensive? Compared to the U.S., it definitely is, more than one dollar expensive than the one in San Francisco. That means Chinese people are willing to pay more to get a cup of Mocha. However, that 28 yuan is enough to get a Big Mac meal (Big Mac, fries, and coke), which costs 22.5 yuan or 17.5 yuan during lunch time. Moreover, 10 yuan can buy a whole meal in local restaurants and 5 yuan can buy a bowl of fried rice at a food stand at night.
That being said, Chinese people are adapting American culture while they are paying more money to enjoy their products and services. Yum! Brands’ KFC and McDonald’s are also big successors in China. That is the reason they focus on China to grow their businesses. Without China, there is no chance for them to expand their businesses so rapidly in a past decade. Therefore, China is certainly a good place to invest for the companies.
However, some failure comes to arise as well, like a recent withdrawal of Google. Honestly, I like China in terms of investment and economy; however, I sometimes dislike the culture. Smoking in building’s restroom, spitting on the street, and talking loudly in public spaces very common in China. The Chinese smoke everywhere even it is a non-smoking area, like a subway platform. Department stores’ restrooms are typical smoking places for them although they have non-smoking signs. I even have seen people smoke in a Starbucks store.
On the street, many men as well as some women are spitting around. It is not rare that I hear the sound of spitting every five minute or even less than that when I am outside. While I try to be away from those people spitting, I hear people talk so loudly. That is I always talk about this issue with my friends from the states. All the restaurants, cafes, and public spaces are so noisy in China. They never stop talking and never care of others.
Subway becomes a battle field during commuting hours. Passengers do not care to each other. They all try to get onboard as soon as doors open while passengers on the train also try to get out. It was a nightmare when I first took a subway in Shanghai with my Chinese coworker after my work and I could not get off the train thanks to passengers on the platform squeezing onto the train as soon as the doors opened. My coworker successfully got off but I did not. There is no rule and it always becomes something, like first-come first served in China.
I am not trying to figure out all the bad manners in China but those bad manners “will not be eliminated at least next one hundred years,” my Chinese friend said. Rather they are the culture in the society. Government still tends to hesitate to open up the “China, Inc.” because it is afraid of foreign culture exposing into the Chinese. While I am not a politician, I do not like to discuss much about Chinese government; however, they are not trustable. One recent example is the bullet train crash in July. The news told everyone to confirm how dishonest the government was.
The stock market behaves the same in China. There are many illegal transactions that the Chinese companies have proceeded and have cheated investors. Those frauds are common because many large-cap companies are state-owned or government-oriented firms. In China, local people are allowed to trade A-shares while foreigners are allowed to trade H-shares. Honestly, I have never made money from trading H-shares, except the mutual fund that I have invested. Trading individual H-shares requires more information about company’s financial statements, backgrounds, and news that tends to confuse us.
It is worth to invest in mutual funds that expose to H-shares. Those mutual funds managers fly around China to uncover companies, and they obtain more meaningful information than anyone else. Most importantly, they communicate with the company’s executives so that they can deeply get into the inside management to disclose financial credibility. China will still run close to double-digit growth and it is hard to ignore if you are especially investors. Let’s unveil more about China in coming years. Next coming articles will be trading H-shares and ADRs (American Depositary Receipts).
Starbucks also has chosen China to be a strategic field to drive their revenues. The company now has slightly above 500 stores in China (as of 2011) and expects to increase its number to 1,500 by 2015. That means the number of stores will be tripled, implying that Starbucks’ revenues in China are going to be tripled.
I Starbucks everyday while I am in Shanghai. Around my home, there are three Starbucks stores and they are located within a quarter mile to each other. In the morning after 10:00, it is already hard for me to find a table to enjoy a cup of coffee. During lunch time, it is the best time to find a table, otherwise you will not find any tables available again till 5:00 in the afternoon. People go out for dinner so tables start to be vacant, but all tables are taken again after they finish their dinner around 7:00 in the evening to enjoy another cup of coffee and chatting loudly.
It seems Starbucks has successfully introduced coffee culture to China in past years while the Chinese, by the way, order mostly specialty coffees, like Mocha, Latte, and all-time-favorite Frappuccino. A Tall Mocha costs 28 yuan or US$4.35 (as of Aug. 15, 2011) in China while San Francisco, CA, currently costs $3.15.
Is the price of 28 yuan expensive? Compared to the U.S., it definitely is, more than one dollar expensive than the one in San Francisco. That means Chinese people are willing to pay more to get a cup of Mocha. However, that 28 yuan is enough to get a Big Mac meal (Big Mac, fries, and coke), which costs 22.5 yuan or 17.5 yuan during lunch time. Moreover, 10 yuan can buy a whole meal in local restaurants and 5 yuan can buy a bowl of fried rice at a food stand at night.
That being said, Chinese people are adapting American culture while they are paying more money to enjoy their products and services. Yum! Brands’ KFC and McDonald’s are also big successors in China. That is the reason they focus on China to grow their businesses. Without China, there is no chance for them to expand their businesses so rapidly in a past decade. Therefore, China is certainly a good place to invest for the companies.
However, some failure comes to arise as well, like a recent withdrawal of Google. Honestly, I like China in terms of investment and economy; however, I sometimes dislike the culture. Smoking in building’s restroom, spitting on the street, and talking loudly in public spaces very common in China. The Chinese smoke everywhere even it is a non-smoking area, like a subway platform. Department stores’ restrooms are typical smoking places for them although they have non-smoking signs. I even have seen people smoke in a Starbucks store.
On the street, many men as well as some women are spitting around. It is not rare that I hear the sound of spitting every five minute or even less than that when I am outside. While I try to be away from those people spitting, I hear people talk so loudly. That is I always talk about this issue with my friends from the states. All the restaurants, cafes, and public spaces are so noisy in China. They never stop talking and never care of others.
Subway becomes a battle field during commuting hours. Passengers do not care to each other. They all try to get onboard as soon as doors open while passengers on the train also try to get out. It was a nightmare when I first took a subway in Shanghai with my Chinese coworker after my work and I could not get off the train thanks to passengers on the platform squeezing onto the train as soon as the doors opened. My coworker successfully got off but I did not. There is no rule and it always becomes something, like first-come first served in China.
I am not trying to figure out all the bad manners in China but those bad manners “will not be eliminated at least next one hundred years,” my Chinese friend said. Rather they are the culture in the society. Government still tends to hesitate to open up the “China, Inc.” because it is afraid of foreign culture exposing into the Chinese. While I am not a politician, I do not like to discuss much about Chinese government; however, they are not trustable. One recent example is the bullet train crash in July. The news told everyone to confirm how dishonest the government was.
The stock market behaves the same in China. There are many illegal transactions that the Chinese companies have proceeded and have cheated investors. Those frauds are common because many large-cap companies are state-owned or government-oriented firms. In China, local people are allowed to trade A-shares while foreigners are allowed to trade H-shares. Honestly, I have never made money from trading H-shares, except the mutual fund that I have invested. Trading individual H-shares requires more information about company’s financial statements, backgrounds, and news that tends to confuse us.
It is worth to invest in mutual funds that expose to H-shares. Those mutual funds managers fly around China to uncover companies, and they obtain more meaningful information than anyone else. Most importantly, they communicate with the company’s executives so that they can deeply get into the inside management to disclose financial credibility. China will still run close to double-digit growth and it is hard to ignore if you are especially investors. Let’s unveil more about China in coming years. Next coming articles will be trading H-shares and ADRs (American Depositary Receipts).
