December 27th, 2008

Moving to China


I spend most of my time this year in China – My family has made an important decision to move to China. Things has being crazy for the last couple of months with the logistics but we finally have our first Christmas over here.

The decision is a combination of my work, but more importantly how I see the world developed in the next decade or two. Out of the 4 fastest growing economy — Brazil, Russia, India, China (BRIC), I think I can fit into China.

One thing I have certainly improved is my Chinese since moving over here, or at least my wife (who is a Chinese teacher) say so. Nevertheless, I think the depth of Chinese I can command is still pretty far from norm conversation.

For example, I was having tea in Beijing several weeks ago when a friend asked me why I could not get along with another certain mutual person. I struggled to find the right words to expressed in Chinese. When she got it, she just said “君子合而不同小人同而不合*”.

Just 12 words explained what I tried to do in the last 5 mins. Chinese is an amazing language — it contain far more “information” per word than English if you know how to use it properly.

* “君子合而不同小人同而不合” is a saying by an ancient Chinese philosopher known as Confucius record in the “The Analect”.

September 5th, 2008

Updates and P2P in China

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I had a crazy month traveling across Shanghai, Hong Kong, New York, Chicago, Seattle, Palo Alto, Los Angeles and finally back in Singapore. It was great trip, mostly business but in between some personal stuff, catching up with ex-boss, old friends and making new ones. A great evening with Marc Canter and his family (love the Canter’s song! :-)

It was also a great time traveling in US as a Chinese. Taxi drivers rave non-stop about the amazing Chinese Olympic openings and for the first time, see China differently. (Well, I wasn’t born in China but still I am a Chinese :-)

On my way back to Singapore, AIMS published the recommendation on the changes to media policy in Singapore. I was one of the stakeholder they consulted early in the process so I got swamp by reporters who got an early preview of the document. Unfortunately, I didn’t get to read the final version before them so I couldn’t really answer most of their questions. Anyway, suffice to say, I was happy with the progress. It is a much bigger step in media liberalization that I expected.

So I was back in Singapore and I met a fund manager yesterday. She asked an interesting question:

“Why are there so many P2P companies in China and not in US?”

It is worthy to reflect on that question because in some ways it is true. In US, we have but other than that, most P2P applications have pretty much gone. Napster, Kazaa, etc, gone.

Wait, what about Skype? Firstly, Skype is not US company. Secondly, Skype P2P is actually very simple – connect A to B, both behind NAT, via a supernode C. In fact, their Kazaa background has more complexity than Skype architecture.

Now compared it to China, the land of P2P Streaming with PPLive, PPStream and UUSee. There are numerous P2P downloads the most famous being Xunlei (backed by Google). And all of them are very successful : PPLive has over 100M installation based, 34M active users monthly.

So what happened?

I think it has to go back to the early 2000 when music industry decided to clamp down Napster. The defining moment was when Napster was shutdown by the court after years of lawsuit. Since then, anyone with a bizplan that even has the word “P2P” is unlikely to get funded. Innovation in P2P basically stop dead, with the exception of bittorrent and Skype, but both become relatively successful without VC backings.

On the other hand, P2P has no such stigma in China. Investments in P2P continues to flourish and today China can claim to have one of the most advance P2P technology in the world. To the extend that when people are finally trying to do video these days, people are looking towards China and see how video are being delivered in the number 1 broadband country in the world by number of subscribers but probably one of the worst by quality.

Look at the Olympics numbers. PPLive alone has more peak concurrent viewers (1.6M) than NBC (600k) and BBC (200k) add together.

There is a lesson to be learned: The unintended consequences of slapping a “evil” label on a technology where in reality, technology is neither good or evil, but rather the use of it.

Disclosure: I am associated with PPLive.

June 8th, 2008

China Surpasses U.S. in Technological Prowess

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China has surpassed the United States in a key measure of high tech competitiveness. The Georgia Institute of Technology’s bi-annual “High-Tech Indicators” finds that China improved its “technological standing” by 9 points over the period of 2005 to 2007, with the United States and Japan suffering declines of 6.8 and 7.1 respectively. In Georgia Tech’s scale of one to 100, China’s technological standing now rests at 82.8, compared to the U.S. at 76.1. The United States peaked at 95.4 in 1999. China has increased from 22.5 in 1996 to 82.8 in 2007. link »

The Georgia Tech “High-Tech Indicator” does not measure how active countries are in research, “but in areas like nanotechnology, China now leads the United States in published articles, but what scares me is China is getting better at marrying that research to their low-cost productive processes,” says Porter. “When you put those together with our buzzword of innovation, China is big, they’re tough and cheap. Again, where is our edge?” link »

– from No ‘Sputnik’ Moment To Reassess U.S. Capabilities: <BR>China Overtakes United States In Georgia Tech’s Global High-Tech Competitiveness Index via

March 24th, 2008

The law is whatever the Chinese government say it is

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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.

March 22nd, 2008

Notes from Beijing Day 5

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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!

March 21st, 2008

Notes from Beijing Day 4

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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.

March 20th, 2008

Notes from Beijing Day 3

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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.

March 19th, 2008

Notes from Beijing Day 2

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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.

March 18th, 2008

Notes from Beijing Day 1

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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 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.

March 6th, 2008

The Power of China


Spend the last two evening with Dr Zhang Luyang 张陆洋, a professor from Fudan University. He is one of the leading academic on venture capital in China. I learn a lot from him about the venture scene in China and makes me rethink about China in the short time we spend together.

I reach a stage where I know enough to know I don’t really know whats’ going on. So I won’t talk about venture capital in China here like an expert (I am not!).

However, something else he said over dinner is worth repeating. It goes something like this:

“Pick 10 random people from Singapore and China, Singaporeans are likely to be better. But 1 out of 10 Chinese is better than 9 out of 10 Singaporeans”.

Go ponder over it.