Arrived back in Singapore late last night, with a soar throat and no voice. First thing back is a crying toddler at the Airport followed to a visit to the GP :-P

I went over to Shanghai for a couple of days but was so busy that I didn’t even have time to blog. But here are some quick notes about Shanghai.

1. Finding Starbuck in Shanghai is tough. On the first day, I spent 1 hour walking at the central park looking for Starbuck. When I found it, I realized they dont have wireless unlike Beijing :-P

2. There is a “rumor” that there would be tightening the rules of foreign investments into Chinese company by the end of year. But it is not a sign that China is rejected foreign investments; rather they still very much welcome it but they are concerned about overheat in property, stock market and a few other verticals.

3. Met with one of my former staff, Jiang Ming Liang. He is now a pretty big shot Shanghai and very well-connected. His latest startup is doing very well; featured in Forbes (China edition) in 2007 and would be likely to go IPO in 2009. Good luck!

4. Met with Isaac Mao finally :-) Very cool guy and need to hang out with him more. He would definitely be one of the reasons I want to go Shanghai soon.

5. Met one of the founder of Tudou.com, the market leader youtube clone in China. He is onto his next startup on casual games.

6. Met with PPLive founders. Spent an afternoon-dinner with the CEO, a young, smart, energetic engineer-cum-business guy. They would be the other reason I would want to go back Shanghai.

7. Attended 5G on Sat. 5G is an entrepreneur-VC group started by Ming-Liang :-) Small gathering but reminded me of those events I used to attend in Bay Area; or like E27/TDM events last year, except they have really quality people, startups and VC. It would definitely a place to hang out if you are looking for tech deals.

8. Learn a new phrase: “太子党”.

Despite losing my voice at the end of the trip, this has being an extremely productive trip for me. I come back with one box of namecards. And yes, I want to go back Shanghai again fairly soon (perhaps in a week or two).

Gen Kanai left a comment for me to read this entry by Paul Denlinger. Paul who spent the last 20 years in China said:
“For many Chinese, “the law” is whatever the Chinese government says it is.”

The law in China is complex. They are subjected to interpretations by officers, at state, at provincials and at local levels. Most Chinese businessman just follow the norm. For example, there are declarations/tax in China on employment for healthcare and accounting. By law, you have to declare “四钱一金” but most business (esp in F&B) outright ignore it.

The law in China is non-existence, vague or worst, conflict with each another. I spent the last week with lawyers and officials in Beijing talking about LP/GP fund structure. The answer I got includes “No way”, “No but …”, “yes but …”, “Yes”, “never done before so no one knows your tax liability”.

The law in China is constantly changing. The story on Regulation 56 is an example, where one day the government decided that all IP/Mobile TV needs to be state-owned or controlled and a week later, the decision was “clarified”. Just a few days ago, they shutdown a few more IPTV sites and reprimanded others.

The law is whatever the Chinese government says it is. We invested in one of the largest and oldest e-Payment company in Beijing 2 years ago. One of the bright spot is the online lottery site they were about to launch with the government lottery (a US$20b/year monopoly business). The site was launch last year and the revenue start rolling in until suddenly the government declared all online lottery to be halt 2 months back. Ouch.

It is no wonder Chinese businessman don’t bother with lawyers. Whereas most lawyers will tell you the most important part of the contract is what happen when things go wrong, Chinese focus on what happen when things go right. If it go wrong, no contract will save the deal anyway.

For the same reasons above, these are also why American business don’t do well competing with the Chinese business in China. Look at ebay, yahoo, google vs their local competitors alibaba, sina and baidu. The latter is still the number 1 search engine China that provide mp3 search that google will not do and thus not likely to overtake baidu anytime soon.

“But baidu is breaking the law!”, you say. Okay, they break law in which country?

Several years ago, when I was doing internationalized domain names, we meet up many officials trying to figure out how we can conduct our business legally. They are always polite but we never got our answer until one of them was kind enough to say “Just go do it and stop asking us. If you ask, we have to say no”.

But thats not good enough for our shareholders. Or any non-Chinese shareholders for that matter. I can understand why David don’t feel like investing in China.

Thats why American companies will keep asking, working with the lawyers to do the “right thing” and get no where. On the other hand, Chinese companies will just go on and do it anyway until they are told not to.

1. A lots of Chinese made money from property. More specifically, made money from the property boom (around 2002).

2. A early success of foreign investments, more money continue to flow into China. While 10M fund is huge in 2000, 100M is considered very small by 2006.

3. (1) & (2) lead to lots of money chasing deals. And when there are good deals, they don’t even need to go out of China to find the money, and they get very good deal from investors.

If you are an investor outside China, chances you don’t get to see much good deals coming out of China since 2007.

4. Rumors say that the Chinese government will further restrict foreign investments via the usual SPV structure by the end of the year. Setup a RMB fund as soon as possible.

5. Preferred market to IPO for Chinese companies are Shanghai A-list, NASDAQ and Hong Kong. After that, they will consider AIMS before Singapore, if ever.

Singapore has a bad reputation of giving low valuation (compared to other markets), low liquidity, take too long and cost too much.

6. Just US$100k will get you priority banking in China, which also applicable worldwide.

7. RMB 30 (US$4) for a Starbuck coffee is normal. But taken into the context where Chinese pays RMB 2000-3000 on average, a RMB 30 Starbuck coffee is like drinking a SG$30 coffee for me.

Surprisingly, every Starbuck I being in the last few days are always pack, mostly Chinese.

8. Starbuck’s Wifi is excellent. It is free and it works!

1. The CCTV, particular CCTV 9 (English channel), is broadcasting non-stop on the Tibet’s riot, showing videos of how the monks are part-taking in riots, the attacks on civilians and interviews of causalities.

2. There is freaking a lot of regulations on investments in China, with many ways to structure the deal. If not done properly, the exits possibilities may be limited.

Gosh, I did deals here without knowing how challenging those are before! The companies has often claims those are being taken care of. Got to learn more about those.

3. There are four kind of RMB funds, two of which applies for overseas money. Although structure is there, no one use it because the tax implications is unknown. Even tax lawyers do not understand the implications. No one wants to be the guinea pig.

4. Avoid representative office structure. Shutting it down later is a hassle.

1. Plan your meetings so you don’t zip-zap across the city. If I have just swap one meeting, I would save so much time.

2. Hipihi is preparing for their launch. Good luck!

3. 官联 pervasive and important in Beijing.

4. The restructuring of China telecommunication market is well-underway. By the end of the year, we will see remaining 3 operators: China Mobile, China Telecom and China Unicom. China Mobile may become the largest fixed-mobile operate.

5. Related to (4) is the 3 new 3G licenses. But it seem unlikely it will happen in 2008. They longer they wait, the better it is for TD-SCDMA – more time to get ready for them.

6. There is no doubt TD-SCDMA will be mandated; The only question left is whether WCDMA and CDMA2000 is allowed.

7. To verify the following history of Xinwei:
– Xinwei SCDMA v3 => 大灵通
– A group from Xinwei doing SCDMA v3 split off to Datang to form the group that did TD-SCDMA.
– SCDMA v4 aka MC-CDMA => Navini
– SCDMA v5 aka CS-OFDMA => claim to be able to do 4.8bits/Hz

8. CS-OFDMA is not to be confused with OFDMA. It is not compatible. CS-OFDMA claims it is able to do 4.8bits/Hz! The technology seem sound tho based on what Dr Xu explained to me.

9. Interesting story to Regulation 56.

Due to a scandal involved some popular personality in China, that leads to the news blackout on traditional media, that leads to the news being carried over Internet, that leads to Regulation 59 being issued in haste along the line “All Internet/Mobile TV must be owned or controlled by Government or shutdown”.

That leads to a panic among the youtube-clones and p2p TV in China that leads to a quiet “clarification” to Regulation 56 a month later that say “All existing operation may control. It will only be applied to the newcomer”.

So from a death sentence, the youtube-clones nows find themselves in a nice little bubble and not need to worry about any further competitions.

10. Speaking of youtube-clones, the market leaders have emerged: tudou 土豆网 and youku 优酷网.

1. “What is allowed does not mean it can be done. What is not allowed does not mean it cannot be done.”

2. Foreigners aren’t allowed to trade A-shares, but you can if you really want. See (1).

3. Doing a local fund is really really tough. Even one of the most establish fund in China IDG-VC don’t have a local fund. This means they incur taxes for all their successful exits but not able to offset it against the loses.

4. The Chinese government is really rich right now. Their companies don’t need your investment (most of the time).

5. Tried out the 5 story entertainment. Level 1 – bath, Level 2 – Food, Level 3 – Entertainment, Level 4 – Massage, Level 5 – Private Rooms. Don’t ask about Level 5.

6. 45-60min gap between meetings is important.

7. Alternate meetings between the east and west side of Beijing is a very bad idea. The time I spent on the cab today is enough to bring me to Tianjin and back.

8. Need to plan out a trip to Tianjin.

Was thinking of spending Day 1 just to walk around the city and to mingle with the locals. But a coffee session with George Guo in the afternoon leads to series of very interesting meetings. (Thanks George!)

I am going to scribble some notes for my own record.

1. Spend more time with CEO 9588.com and Song of Chum Investment. Get a local # before doing so. The latter is very important.

2. Keep an eye on Tianjin. Do something in Tianjin.

3. Setting up a PE fund is difficult in China. No, it is freaking difficult. At least for the next 2 years.

4. 908 is unlikely to be removed (unlike what most outsider thinks). The government wont care if there is 3,000 qualified companies in the queue for Shanghai listing or 1,000 on the new board. (2007, there are about 200+ IPOs in China. It is a 10 year queue…)

5. It is easier for Chinese to invest overseas. It is bloody difficult for overseas to invest in China now.

6. (3) to (5) are closely related to how government is doing foreign money control, which is related to the undervalued Chinese Yuan. They really trying to curb the money flow inwards.

7. Send as much money to China as possible. Keep it in RMB. Currency appreciation + 5.9% FD interest. No safer investment ever against the USD.

8. Related to (7), taking the money of China later might be a problem. But I am not trying to take it out anyway.

9. It is still possible to do China IPO oversea with what they call “spac”. Handful of people knows how to do that. Not sure it is worth it right now tho with the market sentiment.

Have been very busy setting up Thymos Capital last couple of months so wasn’t able to travel much so feeling a bit out of touch. So after postponing this trip a couple of months, I am finally arrived in Beijing last night.

This is mostly a study trip for me, to catch up with old friends and hopefully meeting new ones. I also hope to get a feel of China, which isn’t much as a touch-and-go, but I intend to speak to as many people as possible.

Malaysia 12th election ended last night. I stayed up until 3am refreshing Malaysiakini (mirror) watching the election unfolded.

While BN still remains in control, it suffered the biggest lost ever, garnering merely 61% of the seats (source). The last time the election come this close in 1969, it resulted in a major racial riots. Jeff Ooi, the popular blogger who did won the Penang seat (congratulations my friend :-), called upon all supporters to remain calm so not to give anyone any excuse for riot.

UMNO may be surprised at the result but the writing is on the wall many months ago. Pak Lah was a popular PM when he took over Dr. Mahathir in 2003. He led a landslide victory for BN in 2004, 90% seats, the highest ever.

His slow and steady approach handling matters is a refreshing change for Malaysians but after the first two years of “honeymoon”, many Malaysians have called for results (around 2006). Promises of more developments, opportunities, less red-tapes, and fighting corruptions has nothing to show for. Instead, Malaysians got murder, sex and corruptions scandals.

The V.K Lingam Video is a prime example of what went wrong in Malaysia. When questioned by the Royal Commission, former Chief Justice Eusoff Chin strongly denied that V.K Lingnam and his family arranged the New Zealand vacation together. Even with evidences of receipt and acknowledgment from travel agency, he insist they merely chance upon each another when they are in New Zealand. A while later, the ex-secretary of Lingnam testified “I arranged Kiwi trip”.

Scandals happens. What is more important is how people behave when it happens. Here is a formerly Chief Justice and a top lawyer who potentially lied in front of a Royal Commission and they think can get away with it.

Furthermore, as UMNO fights against PAS, a more radical Islamic party, over support from the Malay/Islam voters, UMNO has taken a more radical stand in many issues, that alienate the non-Malays and more importantly the majority of the moderates Malays. Ironically, PAS become more moderate in the process.

At the height of the racial tension over Article 11 (religious freedom) in 2006, a keris (a Malay sword/dagger) was brandish at a political gathering yelling “defend Malay rights”. Obviously thats going to make non-Malays uneasy. Many remembered the racial riot and killings in 1969. The keris was brandish again a year with a statement that pretty much say “deal with it, sucker!”. Maybe you can do these if you are an uneducated street hooligan but not when you are the Chief of the Youth UMNO (see Keris Controversy)

Race is a dangerous card to play. You play with fire, you will lose.

The result of this election is a clear message to the BN, the ruling coalition, that Malaysians have enough!

For those who don’t understand how we got into the subprime mess in the first place, here is a cool illustration!

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Try this link to see a bigger version if you cannot read the words.