On investing in Chinese companies

Here’s an excerpt from a chilling article from the NY Times yesterday about how the Communist Party in China can change the rules whenever it wants. This article deals primarily with foreign companies doing business in China, but they can do the same with Chinese companies whenever they want to. And if they decide tomorrow that Baidu or another prominent company should belong entirely to the State or the Communist Party, it will be done overnight.

China’s Communists Rewrite the Rules for Foreign Businesses

The party is strengthening its influence — often gaining direct decision-making power — over the international firms doing business in China.

HONG KONG — One hammer and sickle at a time, the Communist Party is making its way deeper into everyday Chinese life — and that includes the foreign companies doing business there.

Honda, the Japanese automaker, changed its legal documents to give the party a say in how its Chinese factories are run. A Chinese state oil giant vowed to put the party front and center in its joint ventures with foreign partners.

And Cummins, the engine maker from Indiana, felt the party’s reach, too, when it tried to appoint a new manager for one of its China businesses. The party said no.

“In the past the American general manager did not understand why the party was involved in decision making,” said Hu Hongwei, the party’s representative to Cummins’s China joint venture, according to The People’s Daily, the party’s official newspaper. But Cummins’s Chinese partner then rewrote the business’s articles of association to give the party more power, Ms. Hu said. The American manager “has begun to understand it,” she added.

The Communist Party’s rise in the Chinese offices and factories of foreign companies is yet another challenge for multinationals doing business in the country, which has the world’s second-largest economy, trailing only that of the United States. President Trump’s protectionism has put American companies in particular in the middle of a brewing fight between Beijing and Washington.

Foreign companies face growing pressure to share sensitive technology. The Chinese authorities have stepped up efforts to foster a new generation of homegrown competitors meant to someday replace foreign companies.

Should a trade dispute between China and the United States worsen, Beijing could be moved to intensify the Party’s role in foreign business even further, creating yet another headache for businesses operating in China.

The Party’s expanding presence in business is part of a broader push by Xi Jinping, China’s president and the party’s top leader, to make it stronger. He has reshaped education to include more Communist Party mythology and increased the party’s role in China’s military. Mr. Xi’s take on Communism — called “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” — has been unveiled with great fanfare across the country.

In the business realm, dozens of Chinese state-controlled companies have changed their articles of incorporation to give the Party a greater role, including the publicly traded units of some of the world’s biggest companies, like Sinopec, ICBC and China Railway Group. The insurance giant China Pacific Insurance, for example, recently amended its articles of association to say that in key corporate decisions, “the board of directors shall first seek for the opinion of the leading Party group of the company.”

“We’ve never seen the Party so forcefully articulate its own goals,” said Jude Blanchette, a senior adviser and China head at Crumpton Group. “Companies are now trying to coordinate with the party in a way that doesn’t sacrifice their own shareholder interest.”

https://www.nytimes.com/2018/04/13/business/china-communist-…

Personally, I don’t care how fast a Chinese company is growing. I think investing in Chinese companies is crazy. The Party can decide tomorrow to say any foreign-held stock is invalid, or that they’ll redeem it at $1 per share, or that they are simply nationalizing the company, or that the Communist Party is taking over ownership. That IS NOT a PREDICTION on my part. But it IS a RISK that I simply don’t need to have.

Best,

Saul

46 Likes

I could not agree more. In addition to the business facts on the ground, on a personal basis I find their increasing military and strategic actions (and those of Russia too) a deterrent to direct investment although I admit I hold several funds investing in Asia generally.

3 Likes

I too could not agree more. I have two friends who’ve done business in China. One found the bribery, corruption so absurd he totally gave up. The other has to hire a company that watches the company she actually does business with. She then had to hire a THIRD company to watch the company watching the company she actually wants to do business with! Absurd. I made an exception for JD.Com which has massive possibilities but I think I will take tax loss. Just doesn’t make sense. And it doesn’t sit right with me.

5 Likes

Pretty sure there is plenty of corruption in American politics or American companies.

Being gov of IL is usually followed by a jail sentence.

Mob influences. City inspections taking bribes in restaurant health inspection scandals are well known.

Madoff. Enron. Banks that are too big too fail.

Yes - there is risk in China stocks. There is also risk in Canadian stocks like SHOP or any US stock with ridiculous multiples.

How would China benefit if it permanently destroyed the willingness to get investment dollars flowing into their country and their businesses?

Should you have an entire portfolio comprised of china stocks? Not a good idea. Should you own only tobacco stocks or only oil stocks or only bank stocks?

Assess your comfort level with risk and have an exit strategy with any investment.

Anything china did could be countered. Tencent owns a piece of tesla. China has bought gobs of us real estate.

Mistreat US investors and what is to stop US from seizing all chinese owned assets and securities based in US? How about US just doesnt pay back debt owed to china?

Could it happen? Sure. Will it? I doubt it.

Dreamer

21 Likes

Yes - there is risk in China stocks. There is also risk in Canadian stocks like SHOP or any US stock with ridiculous multiples.

How would China benefit if it permanently destroyed the willingness to get investment dollars flowing into their country and their businesses?

Should you have an entire portfolio comprised of china stocks? Not a good idea. Should you own only tobacco stocks or only oil stocks or only bank stocks?

Assess your comfort level with risk and have an exit strategy with any investment.

Anything china did could be countered. Tencent owns a piece of tesla. China has bought gobs of us real estate.

Mistreat US investors and what is to stop US from seizing all chinese owned assets and securities based in US? How about US just doesnt pay back debt owed to china?

Could it happen? Sure. Will it? I doubt it.

Dreamer

Very good points. As I see it, the economic penalties for Chinese government violations of private property such as nationalizing major companies are just too great for it to be a feasible possibility. It could happen but it would likely destroy the booming Chinese economy which is making the Chinese people very very wealthy. It would be economic and political suicide. Capital would flee China.

Outside concerns regarding the Chinese political system, there are always unique economic and geopolitical risks. China’s economy may become overheated with too much debt. And then there’s corruption.

As you point out, all of these risks are not unique to China. Even here, government interventions in the economy are unpredictable and sometimes violate private property rights. I’m cautious with investments in the healthcare sector for this reason. We’ve had huge meltdowns recently due to rampant corruption.

With these risks in mind, diversification with only a portion of your portfolio in Chinese stocks seems to be a prudent strategy.

dave

4 Likes

Mistreat US investors and what is to stop US from seizing all chinese owned assets and securities based in US? How about US just doesnt pay back debt owed to china?

Even if this comes to pass, the original point being made, I believe, is this:

Your money itself could be gone overnight. Regardless of what the repercussions are for the country, your $ might not be yours anymore.

Risk-reward

2 Likes

My point is that deterrents already exist that should prevent china from making a move in the first place that affects my invested money.

Nuclear weapons are a-plenty…yet we dont fire them at each other for a reason.

Same concept.

China govt has effes up BIDU and others before when slapping them for content issues a couple years back…so threat of govt disruption is a real risk - no question. But i also believe that offered a depressed entry point for a company that is a leader in search for the largest middle class mobile users in the world, plus a leader in AI and autonomous driving in the largest auto market in the world. And they own majority of the netflix-esque streaming iQiyi that just recently was spun out in IPO.

Willing to risk a spot in my port for the potential upside, but will (as always) be reevaluating the investment thesis after every ER.

-Dreamer

4 Likes

You would think that investors would be selling off Chinese stocks because of this, and there’d be one repercussion after another. My guess is that the Central Committee (or whatever it’s called) might replace Xi before too long, or maybe China will walk back at least some of the new policies.

It all does give me one more reason not to buy Chinese stocks.

As an on the ground China observer over the last ten years I can’t help but comment. I’ll preface my remarks by saying I too shun investment in Chinese companies, but not necessarily for the same reasons cited in Saul’s note.

It’s a little hard to know where to begin, but I’ll start with this comment: Mr. Xi’s take on Communism — called “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” — has been unveiled with great fanfare across the country.

It may not be immediately obvious, but this is a reference to Deng XiaoPing; the guy who instituted economic reforms in China moving the country away from Mao’s socialist dreams toward an economic system based on the capitalistic principles of competition and free markets. Deng created Special Economic Zones (SEZz). Each SEZ was observed, modifications were incorporated based on lessons learned and the system progressed rapidly throughout China. Nevertheless, Deng referred to it as “Socialism with Chinese Characteristics.” The wording carefully chosen in order to make it sound as if he was following a plan consistent with Mao’s dream of a socialist China. To this day, Mao is still revered in China in much the same way George Washington is here in the US. Just pointing out that a literal translation does not always mean exactly what it sounds like it means.

Others who have commented on this thread have mentioned the rampant corruption in China. That was certainly true prior to Xi Jinping’s rule. But Xi made it known before his election to President that one of the primary goals of his administration would be to break the back of government corruption. He saw it as a direct threat to the one party rule as the Chinese people were becoming increasingly cynical of the government. Though no one thought Xi would succeed in this effort, he had (and continues to have) unfathomed success. The former Minister of Railroads (controlling an enormous budget) is in prison. Bo Xilai (former Mayor of ChongQing with jurisdiction over 30M people) and his wife are both in prison. Numerous party officials from all parts of China have been demoted or imprisoned. Exorbitant party functions at 5 star resorts and restaurants have ceased. Elaborate, modern architecture buildings with plush offices for government officials are no longer being built.

Xi’s enormous success at reversing and reducing government corruption had significant political fallout. First, he quickly won the hearts and minds of most of the Chinese people. He set out to do the impossible, something everyone thought would simply be lip service, but instead of just PR campaign he largely succeeded in doing what he said he was going to do (note, he never claimed he would end corruption in the non-government sectors of the economy, cutthroat business practices continue more or less unabated). The other political payoff was that by jailing and demoting so many powerful party members he pretty much eliminated most all his rivals, thereby clearing the way for the recent change in the Chinese constitution allowing him to serve more than two terms as president (as an aside, the institution of a process for orderly succession of leadership and two 5-year terms of service were political reforms instituted by Deng XiaoPing).

President Xi has announced a plan to eliminate abject poverty in China by 2040. Will he succeed with this big goal? Most observers are sceptical, but it is certain that he won’t succeed if he destroys the businesses that are moving the economic needle in China. On the other hand, he also announced plans to shut down coal mining in China over an unspecified time period and shuttering hundreds of SOEs (State Owned Enterprises) over the next two years. His plans for closing SOEs includes economic aid for displaced workers and government funded retraining programs. Unlike the shrinking middle class in the US, President Xi is taking positive steps for expanding the middle class.

And China will continue to expand its aggressive infrastructure development including new and modernized seaports and airports. There’s a new airport under construction in Guilin, my wife’s home town as I write. Last year we were able to take high speed rail from Guilin to Guangzhou making total travel time less than air and far more convenient in that the rail stations are inside both cities as opposed to the airports which are far outside of the city. New highways criss-cross much of the Chinese countryside. I’ve been on some of these roads and they are impeccably dead flat highways with zero potholes. The electrical grid is also under rapid development with increasing amounts of renewable energy sources. China erects a new wind turbine at the average pace of one a day. China has a goal to become the world leader in clean energy. Rather than reversing regulations that protect the air and water, China is doing just the opposite under President Xi’s leadership.

What this all indicates to me is that despite the fact that the Communist Party permeates many aspects of Chinese life, I think it extremely unlikely that the Chinese government would whimsically nationalize any of their internationally important businesses. And the internationally important businesses are the ones that trade ADRs on US exchanges. As I mentioned earlier, the Chinese government is far more focused on closing SOEs than creating new ones.

However, I will concede Saul’s point that the government most certainly has the power to take over just about any business should it find a reason to do so. As recently as last February the Chinese government seized control of Anbang Insurance Group, owner of New York’s famed Waldorf Astoria hotel and one of the largest insurance companies in China if not the world. A few of the officers have been prosecuted and imprisoned. The government has asserted that they will maintain control of the business for a year during which it will be restructured and deleveraged. After these revisions, the stated intent is to return it to private control. No policyholders or business associates are to be adversely impacted by the takeover although some business relationships will surely be terminated. The reasons for this take over are manifold. The primary reasons given by the Chinese insurance commission were the extent of highly leveraged acquisitions, corrupt practices (this probably means money laundering and facilitation of capital flight), and high levels of risk for one of China’s too-big-to-fail businesses.

But, in my opinion wanton nationalization of Chinese companies is not a significant risk. Given that I don’t think the risks of government takeover is great, why am I reluctant to invest in Chinese companies?

My reasons are based on what I perceive as accounting risks and insider attitudes about the investment community. In a word, financial reports from Chinese companies are not trustworthy. Even companies that employ American accounting firms and file all the SEC required documents are not to be trusted. I’m not saying that all financial reports are falsified, not by a long shot. But, if a company gets into trouble, there’s little to stop them from bending the truth when it comes to reporting. The reports my have the appearance of GAAP compliance and they may have been produced by PWC or whoever, but the operational numbers that feed the reports are subject all kinds of manipulation. The other big risk of investing in a Chinese company is that virtually all Chinese companies are managed by an inside circle. Typically, the members of the inside circle hold investors in disdain. Jack Ma, for example, even said so a number of years before AliBaba went public. Mr. Ma is famous for lists. On a list he produced several years ago of the ten things that makes a business successful, he put investors dead last. He’s learned to tone down his rhetoric, but I’m confident his attitude has not changed. So long as the interests of the inner circle align with the investors, meiyou wenti (no problem). But, the investors are rarely considered when Chinese executives make decisions. Should the interests of the inner circle run contrary to the shareholders, the shareholders will inevitably be the losers.

In my opinion there are simply too many opportunities for profitable investments in Western companies with officers with a shared culture, boards with outside directors, closer scrutiny by accounting firm audit teams and more direct oversight by regulatory agencies to accept the additional and substantial risks of investing in Chinese companies.

You might argue that the risks I’ve cited are also present in Western companies. And that is true. But I maintain that these risks are not common and expected in Western companies. For Chinese companies I think just the opposite is true.

97 Likes

Brittle,
This was a great post…thank you for sharing your on the ground insights.

The accounting issues have been whispered about and is one reason i have shied away from BABA and Tencent.

Curious if you have any feedback on how common/prevalent usage of Baidu and iQiyi are from your experience, if autonomous driving seems to be moving forward in China, and if you are aware of Baozun?

Thanks!
-Dreamer

Brittle, this was excellent just excellent. I am humbled by your willingness to share your first had experience I such a detailed post. thank you!!

Regards,
Jim

1 Like

My guess is that the Central Committee (or whatever it’s called) might replace Xi before too long, or maybe China will walk back at least some of the new policies

Not a chance I don’t think. one belt one road will secure the internationalisation and world dominance China seeks. Xi will be recognised for it.

I see these risks diminishing as China internationalises and becomes more interdependent.
Ant

1 Like

Xi’s enormous success at reversing and reducing government corruption…

There appear to be some contrary views. For instance, some claim that most of what has actually happened is that the corruption is simply less blatant:

Xi’s anti-corruption campaign has been highly political, opaque and selective. It suppresses the most apparent features of corruption (like banquets and travels) and purges his rivals with the help of the party’s very secretive discipline inspection commissions, which are controlled by his political ally Wang Qishan. Xi has refused to make public the CCP leaders’ wealth, let alone to allow the media to exert some kind of external control on the campaign. Corruption has become more discreet but has continued ? the bribes have actually increased in proportion to the risks taken. In other words, party cadres’ corrupt practices have been hidden, rather than really put under control and ferreted out.

https://www.huffingtonpost.com/entry/china-corruption_us_58c…

which concludes with:
There is an unhealthy and close connection between political power and business activities in China. The CCP’s leading cadres’ corrupt practices are likely to continue because they have been one of the most efficient recipes of China’s economic success story. This corruption is also unlikely to disappear because, although it has given more space to the market and private entrepreneurship, the party has consolidated its monopoly of political power.

Or this article (https://theconversation.com/understanding-chinese-president-… ):
Chinese President Xi Jinping has made fighting official corruption a cornerstone of his reign. Judging by the numbers alone, the campaign has achieved impressive results. Astonishingly, the Chinese Communist Party (CCP) has disciplined well over one million officials since Xi took power in 2012. The anti-corruption campaign has snared hundreds of high-level leaders – including, most recently, former Chongqing Communist Party General Secretary and Politburo member Sun Zhengcai.

But then points out that Xi’s family has inexplicably managed to accumulate over $1 billion in wealth, according to reports by Bloomberg.

And it puts this limit on the future: Corruption is built into the structure of China’s governing institutions. Xi’s campaign is more about managing the scope and consequences of corrupt practices than rooting them out altogether.

Which is really scary. Essentially, he’s reducing the number of people taking bribes which means he has less bribe-taking people to manage: All of this explains why newly installed leaders move quickly to cull the number of pigs at the trough, as Xi has done since taking power in 2012. By retargeting private rewards only to those whose support is truly essential and reducing the size of payoffs to the minimum necessary to avert defection, the leader thereby shores up his power position with a smaller and more manageable ruling coalition.

Of course, culling the herd means more than simply cutting rewards to non-essential coalition members. They must be jailed or otherwise rendered incapable of retaliating. Factions organized around political rivals must be disrupted.

I fell victim to TMF’s Global Gains service, with promises of sorting through what was really going on with Chinese companies by actually visiting them and doing big due diligence. I consider myself lucky to have sustained only small losses. And while the Chinese economy will continue to grow, I see no way for me to profit from that without taking on unreasonable risks.

12 Likes

Brittlerock,

Thanks for the informative and balanced post.

With respect to “insider attitudes (towards) the investment community”, I make the following observations.

The keiretsu model in Japan, and chaebol model in Korea, were used to keep pesky outside shareholders from influencing the activities of companies, so that company management could concentrate unhindered on making the companies industrial powerhouses. The models worked, and both countries became world-leading industrial powers.

The Aufsichtsrat , or supervisory board, rules in Germany effectively ensure that outside shareholders can’t control the companies in which they invest, because supervisory board control is shared equally between shareholders and workers, and the shareholder portion is shared between management-friendly government and sympathetic institutional shareholders, and outside shareholders. That didn’t stop Germany from also becoming a world-leading industrial power.

Scandinavian countries, with their renowned “Scandinavian socialism”, also put the industrial interests of their companies above the interests of external shareholders. Those countries also became world-leading industrial powers, when measured on a per capita basis.

Did the “investment communities” lose out in these companies and countries? Perhaps, in a relative sense they succeeded less than the successes of the respective companies and economies would have suggested. In an absolute sense, however, there were long periods of time during which the investment communities did very well. And, it could be argued that the success of these companies and economies dragged up the level of success of the investment communities.

Perhaps China also aspires to become a world-leading industrial power, and is therefore emulating the masters?

On the other hand, we all know what phrases such as “muppets” and “putting lipstick on pigs” mean in investing, and who the villains are (hint: insiders or “smart money”), who the victims are (hint: the investment community or “dumb money”), and which country coined these phrases (hint: not China).

And, the popular dual-class share structure of many companies, especially smaller technology companies like those of interest on this board, are nothing if not mechanisms for insiders to disregard the wishes of the investment community. And, that’s usually a good thing, because the privileged insiders tend to be the company founders who usually have the expertise, judgement and drive to succeed that the investment community lacks.

Some Chinese companies, such as Ali Baba (mentioned by Brittlerock), also have used a dual-class share structure, but are their motives any different from the many US technology companies that do likewise?

Bombora

6 Likes

Separately, Jim Chanos says China’s economy is fueled by debt: http://money.cnn.com/2018/04/11/investing/jim-chanos-markets…

Investors should be wary of jumping aboard the Chinese internet company “craze,” Chanos added, with companies like Alibaba (BABA) and Tencent (TCEHY). “There’s accounting issues there, there’s corporate governance issues there,” he said.

Here’s some public TMF articles on a few Chinese companies:
https://www.fool.com/investing/2018/04/02/8-reasons-tencent-…
https://www.fool.com/investing/2018/04/03/8-reasons-to-buy-t…
https://www.fool.com/investing/2018/02/07/these-chinese-inte…
https://www.fool.com/investing/2018/03/09/forget-bitcoin-you…
https://www.fool.com/investing/2018/04/09/why-jdcom-inc-stoc…

2 Likes

As an on the ground China observer over the last ten years I can’t help but comment. I’ll preface my remarks by saying I too shun investment in Chinese companies, but not necessarily for the same reasons cited in Saul’s note.

It’s a little hard to know where to begin, but I’ll start with this comment: Mr. Xi’s take on Communism — called “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” — has been unveiled with great fanfare across the country…

thanks brittlerock, for a very interesting and insightful post from someone with experience on the ground.
Saul

1 Like

My reasons are based on what I perceive as accounting risks and insider attitudes about the investment community. In a word, financial reports from Chinese companies are not trustworthy

Thanks Brittle!

In my travels to China a few years ago, it was very obvious to me how the Chinese to their very DNA, have a “copy” mentality…the shops, the billboards, the highways, their chosen American names, etc. As much as they may despise our capitalism, there seemed to be a desire to replicate it and to be like Americans.

That replication is the fastest way to get from a poverty stricken underdeveloped country, to a stronger middle class in a fraction of the time it actually took the US to move through its industrial revolution, transportation revolution, etc. So they copy…and still copy…and steal IP…and copy.

As western investors, we are also introduced to Chinese companies with immediate confirmation bias because they are the “next…fill in the blank”…the next investment “copy”:

BIDU…the next GOOG
BABA…the next AMZN
BZUN…the next SHOP
DANG…the next AMZN
etc.

So investors can be lulled into not wanting to “miss the next GOOG”…when in fact these are all stand alone businesses with their own risks and foibles. But without question, China continues to copy the US playbook and so they should…investors need to look past the famous US company comparisons and evaluate them as in any other investment.

I get that your angst about proper financial reporting remains a concern…we have our US equivalents in spades…Enron, Fannie Mae…the latter which took down our economy in 2008…so this is most certainly not confined to China.

Perhaps I am naïve but I do think some of the Chinese accounting irregularities are related to pressure to change rapidly, far more rapidly than the US changed since it took longer to get through the industrial revolution than a copycat and their experience/education just isn’t there…for China it has been about speed…not necessarily quality or accuracy.

But as China becomes the world’s largest economy in the next 2-5 years, they will be required to establish pristine financials and legitimacy…or their growth will stagnate…investors will lose their appetite for shenanigans. So I certainly get your point about accounting concerns and the much less frequent risk of government takeovers.

But for sure IMO, how one can ignore the impending world’s largest economy simply flabbergasts me…sounds old school and caught in the past…China is not stagnant, nor are its irregularities written in stone into the future. They are a very driven people both individually and as a society…seems foolish to ignore the investment potential.

As an aside, Gullain and Yangshuo has to be one of the prettiest places on earth!

One other aside, we went into a few families homes to better understand the culture and drive…if American kids think they will be handed victory, they are sadly mistaken. These kids from poverty level inner city type dwellings…up at 6 am for exercise, then school all day, then a series of tutors when they got home, then homework from BOTH school and tutors and finished by 11 pm…rinse and repeat…including weekend tutors, etc. Wonder if you raised your kids in that same spirit since you live there?

Best:
Duma

14 Likes

Hi Duma,

I also was in MF Global Gains and had 11 of 13 little Chinese companies (trading in the US) turn out to be dishonest to shareholders in one way or another. I think it’s not the hurry to modernize, it’s a very ingrained cultural attitude that family comes first, then close friends and contacts, and way down in last place comes the public stockholders.

Here’s an example that actually occurred in one of the companies that we were invested in through Global Gains. Let’s call the company ABC. As I remember it, management of ABC ran a secondary and raised $25 million to buy a startup for $25 million, which would be a new division. Only it turned out that the startup was a owned by cousin of the CEO. It had only one employee, the cousin. It had only one office with only one telephone, actually located in ABC’s headquarter offices! As these facts trickled out, one by one, the Global Gains people couldn’t believe it. They had visited ABC in China. The CEO was so nice and so charming. “Let’s see what the new division does.” etc. It emerged that the new division had been developed by ABC itself, there was no startup, and this “purchase” of a startup was just a way to transfer $25 million from stockholders to the CEO’s family (the CEO would of course get a substantial portion of it for himself directly). And oddly, there was no social opprobrium attached in China. It was a natural and well-thought-of course of action. Taking care of your family was what you were supposed to do.

There were lots of others, falsified prices for factories, mines that weren’t there, etc etc. (I’m sure other veterans of Global Gains can fill you in). Just a way of life.

I grant you that avoiding China may make you miss out on a number of rapidly growing stocks, butI can find companies in the US that are growing fast enough for me.

Saul

16 Likes

I was in Global Gains and had 11 of 13 Little Chinese companies…grant you that avoiding China may make you miss out on a number of rapidly growing stocks, butI can find companies in the US that are growing fast enough for me.

Saul:

I was never in any of those companies…ever.

That is an important distinction…there has been a confirmation bias to sell outside investors a copycat US equivalent of the best US companies ever (GOOG, AMZN, etc.)…this was the allure and it was the wrong way to consider investments…they are standalone businesses with their own risks, TAM, etc.

I have owned one Chinese company BIDU…for various reasons.

But the point is not whether there are ample companies in the US to invest in, it is the rigid decision to ignore the biggest economy in the world come 2-5 years from now. That doesn’t seem prudent but that said, I am also very prudent in what I would invest in.

Perhaps Ant can give his perspective because he has done quite well in various larger Chinese companies like BABA, BIDU, JD, etc.

He isn’t to my knowledge though…investing in “11 or 13 Little” Chinese companies…hopefully you see the vast difference.

4 Likes

Alibaba doubled and just playing with house money. I read those financials and wade through the corporate structure especially and I really don’t much about the company. I try.

I’m not one who invests only in things I understand. That’s just another lame Buffett chestnut he Buffett pays no attention to. Why is sloth so highly valued when it comes to money?

It’s a bet on Jack Ma who seemed like a good guy. Any outsider who pretends to really know BABA is blowing smoke. Hence just playing with house money. I feel much better about the commies than Trump Ryan.

Buffett in BYD that he understands I think. At one time Good Housekeeping Seal if Approval. Those days long gone but Tesla has zero chance. Duh

1 Like