Should Tech Companies Invest In China?

from the yes-and-no dept

A friend of mine just returned from a year in China where she said it felt just like Silicon Valley did during the early boom years. Lots of excitement. Lots of opportunity. Certainly, a number of American technology companies think so, as they’re all investing there. Red Herring has a series of articles about tech companies investing in China, where they basically say it’s a very risky proposition. It could be easily argued that it’s where the next tech revolution will happen, or it can just as easily be said that it’s just another bubble. Understanding both scenarios would make sense for anyone looking to invest in China.

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Comments on “Should Tech Companies Invest In China?”

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dorpus says:

Lots of bubbles

China has had many investment booms since the 1980s. Every time outsiders invested, they were typically disappointed by the low demand in Chinese markets. Most Chinese would rather get cheaper counterfeit goods than Western-made, ethical, environmentally conscious goods. Intellectual property enforcement is still a joke. On the other hand, outsiders do benefit from having companies in China for accounting shell games, since accounting laws and other ethics are not really enforced.

Typically, what happens is that “Western investment” in China is implemented by Chinese-American or Taiwanese middlemen. They are delegated responsibility for local matters, while headquarters back in the USA only sees the China office as a black box producing cheap goods.

It will remain to be seen how much true innovation can be carried out by Asian economies in the future; the 20th century pattern has been for them to become complacent, chummy, and corrupt once they attain a satisfactory standard of wealth.

Tim says:


Last year I spend 8 months living in the ShenZhen
special economic zone. (reading techdirt daily)

I would have to say that’s it’s VERY different
than the valley. Money doesn’t flow like water
and due diligence can take up to a year. It’s a
very nice playing field for the little guy to
break into.

Foriegn investors MUST take note of learning at
least some Mardarin and MUST be very familar with
business customs if they are going to get any
further than the goverment taking your first
$250,000 and showing you the door. I’ve had 2
ventured that went down the drain rather quickly
before I learned the game. After a successful
consulting stint for the party itself, my 3rd
venture is doing very well.

Bottom line dealing with China business people;

Everybody is a theif until they call you brother
Breaking bread means nothing , they love food
Refusing drink and prostitutes can viod a contract
Keep investment funds on shore to a minimum
Add 90 days to any ETA they give you
Labor costs 40% of what they told you
Bargin for EVERYTHING, it’s expected and the price is inflated for the “fun” of bargining

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