Toast Your Foreign Hosts
Investor's Business Daily
Toast Your Foreign Hosts
Tuesday December 16, 5:53 pm ET
Gloria Lau
"There's nothing like the Chinese economy," Joseph Meuse, founder of Washington, Va.-based Belmont Partners, told IBD. "It's nothing like the world has ever seen."
Since 2003, Belmont has been helping Chinese firms get on U.S. stock exchanges via reverse mergers, in which private firms buy public ones to bypass the complex process of an IPO. Including Belmont, Meuse's closely held businesses bring in yearly sales of $10 million. Meuse and Richard Anslow, managing partner at law firm Anslow & Jaclin's New Jersey office, share tips.
Know the right folks. "It's extremely important to work with well-connected people," Anslow told IBD. "We deal with most of the major law firms and investment firms. I can make a phone call or send an e-mail and learn if that group is influential or not."
If someone claims he's related to a local official, ask around to confirm. Chinese society is tightknit.
Avoid arrogance. "Too many Americans bring their bold, brash ways and fail to understand why they turn off Chinese business owners." Meuse said. "Americans act condescending. They laugh under their breath at the Chinese way of doing business." You want their business? Show respect.
Earn their trust. Deals are done over drinks and elaborate meals. "If someone offers you alcohol, you drink," Meuse said. "If someone offers you a cigarette, you smoke."
Eat some of everything, even if it's ostrich intestines. Avoid forks. Use chopsticks. "It takes a few four-hour meals to accomplish a deal," Meuse said. "It makes sense. They're trying to learn who they're dealing with, not just whether you're competent. They're handing over their business to a stranger."
Avoid public clashes. If your bilingual staffer overhears something between the Chinese CEO and his translator that upsets you, don't confront the CEO in front of his colleagues. "We catch things, but we never embarrass the CEO," Meuse said. "We bring it up later, privately. Never lose your cool or demeanor."
Learn some Mandarin. "Shanghai and Beijing are very sophisticated and modern, so businesspeople (mistakenly) assume people speak English," Meuse said.
Master a few words in their language, carry a dictionary and hire a translator. Know where you need to go. "The basics of getting around in Beijing or Shanghai are harder than in other cities such as Paris, Hong Kong or Frankfurt where English is more commonly used," Meuse said.
Live there. Stay in a hotel in China for several months. Meet other Americans and Europeans. Learn from them and decide if it's right for you. Meuse sent two staffers there for five months before deciding when and where to open a Shanghai office.
Under-promise, over-deliver. "If you tell (a Chinese client) it'll take two to three months and it takes three and a half, they'll be disappointed," Anslow said. "Once that information gets around, it becomes hard for you to do a deal afterward."
Tuesday 16th of December 2008
Signals from Hollywood to Wall Street demonstrate deepening economic uncertainty
The Inland Echo
By Michael Breckenridge
If the wild swings on the stock market and the meltdown in mortgages are any indication, Wall Street and the American economy in general are in serious trouble. In a wry comment, the New York Times even posited that the lack of pointed humor about politics and the economy on the Emmy's broadcast is another measure of the darkness of the issue.
Actress and writer Tina Fey thanked NBC for sticking with her show despite the "turkey burger economy", but reality host Ryan Seacrest did not mention her recent comic portrayal of Alaska Governor Sarah Palin on Saturday Night Live because "I was told not to," he said.
While Hollywood celebrated its own, two Wall Street behemoths were busy with plans to transform themselves. In one of the biggest changes to Wall Street in decades, Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, the Federal Reserve said Sunday night.
This is yet another in a series of recent "firsts" from the business world, and it speaks volumes to those who follow the market about how concerned the most powerful people in high finance have become.
"Goldman and Morgan's move to transform to holding companies is to get under Fed protection," said Joseph Meuse, president of Belmont Partners, an international financial consulting firm with offices in Washington, Virginia and Shanghai, China. "This move will allow Goldman and Morgan greater access to Fed emergency funds and just as important, Fed protection. It is a move out of fear, but if it works out long-term, it will give both firms great power in the marketplace. I think both firms are very concerned about the ban on short-selling not being extended [the ban expires October 2] and are taking the opportunity now to create more long term stability. There is a large belief in the States that all of the proposed changes are not enough to get out of the current situation - or they will create more issues than the solve. This will continue to hurt overseas markets including China. Investors will continue to seek safety in the form of cash."
"Cash is king" is a phrase often heard regarding issues of credit and banking, but even cash may not be enough protection as the dollar continues to slide against the euro. The Dow fell 370 points in trading today, just one more whipsaw undulation, and probably not the last.
Monday 22nd of September 2008
China SMEs look for and find foreign investors
Reuters
By Kirby Chien
BEIJING (Reuters) - They are far from household names but, as domestic stock markets wither and credit tightens, more of China's smaller, fast-growth firms such as Puda Coal Inc are looking overseas for investors.
China's army of small and medium enterprises (SMEs) makes up as much as 70 percent of the country's economic output, but has been hit disproportionately hard by government steps to slow rampant investment and soaring inflation.
"SMEs in general have a huge hurdle to clear to secure bank lending and investment in China," said Tian Wenwei, vice president of Puda, a supplier of coking coal, used in steel making. "But with steel prices rising, we have had no problem finding foreign investors."
Foreign funds now own 35-40 percent of Puda -- which has previously said it was eyeing a Nasdaq listing -- even as domestic share flotation's have been going through a rough patch.
Chongqing Machinery & Electric Co Ltd (2722.HK: Quote, Profile, Research, Stock Buzz) shares fell 19 percent on their debut this month in Hong Kong, putting a damper on other issues.
While it's difficult to track SMEs because investments are often under $50 million and fly under regulatory radar, those that cater to the vast and varied sector are upbeat.
"China is still a hot investment place," said Kent Kedl, the Shanghai head of consultancy Technomic Asia, which helps U.S. and European clients find investment partners in China.
Kedl said a quarter of the deals he closes are now some form of merger or acquisition, a ratio he reckons will grow to two-thirds in the near future.
HUNGRY FOR CASH
Announced cross-border M&A activity for mainland companies -- both inbound and outbound -- tripled to $48.6 billion in 2008 through June 18, according to Thomson Reuters data. In comparison, M&As in Asia Pacific including Japan rose 8.9 percent to $350.3 billion.
"The real funds that understand China are still hungry for investment," said Joseph Meuse, founder and managing director of Belmont Partners, a specialist in U.S. reverse mergers. "How could you not be interested in a company growing at 30 percent."
Belmont helped Shanghai Medical Technology Co raise $12.5 million earlier this year in a reverse merger, a move that helped the Chinese company secure an over-the-counter listing much faster than the traditional initial public offering route.
Meuse, now involved in opening a consulting firm in Shanghai to increase the deal flow to Belmont, said the U.S. financial turmoil would have a small impact on business this year.
China's economy has shown resilience even as the U.S. economy lists on the brink of recession and global markets are battered by soaring oil prices and the credit crisis.
To prevent overheating, China has raised banks' required reserve ratio 17 times in a two-year monetary tightening cycle and ordered banks to limit new loans this year at 2007 levels.
In other moves aimed at smaller firms and to encourage the production of higher value-added goods, Beijing has reduced export subsidies and stiffened pollution standards.
GOING IT ALONE
But the less stringent bookkeeping and opaque ownership structure that often characterize Chinese SMEs can turn due diligence into a lengthy exercise for investors.
"These are pretty nervous people," said Technomic's Kedl, referring to his clients.
Direct investors are not the only ones looking to China.
As investor appetite for global IPOs has slowed amid turbulent financial markets, the world's bourses are competing more aggressively for business from China.
Canada's biggest stock market operator, TSX Group Inc (X.TO: Quote, Profile, Research, Stock Buzz), said last month it was looking to open an office in China -- its fastest growing source of new listings -- which would be its first outside North America.
The TSX is home to most of the world's listed mining and energy firms -- key target sectors for resource hungry China.
TSX is hoping for 25-40 listings annually from China within five years, compared to seven last year.
It is not alone. The London Stock Exchange (LSE.L: Quote, Profile, Research, Stock Buzz) opened a Beijing office in January, following similar moves by the New York Stock Exchange, a unit of NYSE Euronext (NYX.N: Quote, Profile, Research, Stock Buzz), and Nasdaq (NDAQ.O: Quote, Profile, Research, Stock Buzz).
But despite all the attention they are attracting from the world's investors, most of China's SMEs will find it difficult to secure overseas backing.
"The larger and better managed SMEs will be able to attract foreign investors, but there could be millions of them," said Tang Min, the deputy secretary of the cabinet's China Development Research Foundation. "The government needs to open access to big state banks to improve their funding channels."
"The larger and better managed SMEs will be able to attract foreign investors, but there could be millions of them," said Tang Min, the deputy secretary of the cabinet's China Development Research Foundation. "The government needs to open access to big state banks to improve their funding channels."
($=6.94 yuan)
(Editing by Ian Geoghegan)
Wednesday 23rd of July 2008