Sunday, January 11, 2009

Capitalizing on China: Specific Suggestions

My radio show today included a 40-minute conversation with Jonathan Woetzel,who's in his 18th year living in China as head of McKinsey's Shanghai operation. In light of that plus the research I did in preparing for the show, I believe these are good bets for capitalizing on China's sunrise while the U.S.'s sun sets in the west. 

Buy raw land in the near suburbs of Beijing, Shanghai, or a slightly smaller but growing city.  Choose property that is slated for light-rail and other major infrastructure development. Hold it until most of the surrounding parcels are developed and then sell to the highest bidder--probably a major Chinese developer, the Chinese government, or a U.S. multinational.

Open a school for entrepreneurs. China is said to be a country of a billion entrepreneur  but because China is new at this capitalism thing, many of those entrepreneurs have a lot to learn. And they're smart enough to realize they can learn from Americans, a people that has been entrepreneuring for 250 years. 

Sell designer-label products (e.g., Calvin Klein) to the major retailers  in 50,000-100,000-person cities. The big U.S. corporations are still busy establishing their distribution chains in larger cities. The opportunity for a little guy is to go where the big.U.S. corps aren't (yet.)

Sell precision manufacturing parts and equipment to small Chinese manufacturers. 

The satisfactory execution of such ideas require one or more trips to China or taking residence there. It requires getting a translator and, critically, local expertise. Start with the U.S. Chamber of Commerce there, but that's just a starting place--you'll have to take the time to build local relationships.

The bad news is that Woetzel said that China is very China-centric. So Americans have one or two strikes against them. And the Chinese have a set of business tactics designed to weaken Americans--for example, they'll stall on agreeing to a deal until just before your return flight to the U.S, when you're most vulnerable to a lowball offer. 

But if you diligently  and intelligently execute on the above, people like Woetzel, the N.Y. Times' Tom Friedman, and a chorus of other folks, including me believe that China and smaller emerging Asian countries offer a far more fertile opportunity for success and wealth than does the U.S. 

If the above strategies seem too daunting, you might do what I'm doing: Buy shares in FXI: an exchange-traded fund consisting of 25 of China's largest companies--the equivalent of the Dow-Jones 30 or GXC, which consists of 150 of China's largest--the equivalent of the U.S.'s S&P 500.


Husker said...

Thanks for the tip regarding FXI.

Anonymous said...

This is the first-ever year-over-year drop in e-commerce spending in US since the e-commerce category was established, the same study reveals. Such a drop is the result of low consumer confidence in online shopping, as well as a "tight disposable income".

Marty Nemko said...

The studies I've seen show a steady increase in consumer confidence in online shopping.

The slowdown (which has been bucked by the best online retailers such as Amazon) is almost completely a function of the economic slowdown. Other studies predict massive mall closures. I'm inclined to believe those.

Horse Girl said...

Apparently some U.S. schools have been capitalizing on China: See Great Schools blogger Carol Lloyd's post on how both high schools and universities are wooing Chinese students because they can charge them so much.


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