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Beijing Day 6

Memorable events of the day:

* Lunch with Tony Wei, CEO of MySpace China (www.myspace.cn), who gave us a tour of the offices and a 2-hour education on the Chinese Internet market. There are tremendous opportunities due to the massive size, but the market is still very immature due to the fact that the per capita GDP here is about 1/10th of the U.S.

* A negotiation with a woman at the Silk Market ended up in a minor assault — she literally hit me as I walked away when she did not like my “best price”. It was harmless and very funny!

* Passing out ice cream cones to our favorite vendors from the day. After literally 6 hours of intense shopping — every stop includes a serious haggling session — Steve and I took $20 to the mini-grocery store and had them give us as many packaged ice cream cones as that would buy (about 3 dozen) and we handed them out Oprah-style. “You get an ice cream cone. And you get an ice cream cone…” At one point, we literally almost started a riot!

* Getting fitted for a custom-made suit — for 900 Renminbi (~$133) I’m getting a suit and dress shirt made. “Susan” and her sister took great care of us. And the cool thing is, they keep your measurements on file, so once you’re in their system, you can re-order and they’ll ship to you!

* Returning underwear for a larger size at one of the Silk Market stations. See “Skid Row” post here.

* Rocking to 50-cent in the back of taxi home from the market. The Chinese cab driver, in splintered English asked, “You like the rap music?!”

* Enjoying “comfort food” — a hamburger, fries and a beer @ Molly Malone’s, an Irish pub across the street from our hotel.

Skid Row

I am pleased to report I successfully executed an “exchange” at the Beijing Silk Market…

But here’s where the story gets really fun…or gross….

I bought 5 pairs for boxer briefs during our first visit the other day. I paid too much — 100 RMB (~$15) — although these would have been about $15/paid back home.

Anyway, I’m a US “medium” — large on a bad day — so I went with large to be safe.

Well, when I got back to my hotel room, I tried on a pair of the Dolce & Gabanna knock-offs, and they were more than a bit snug.

Joking with my buddy Steve, I said, “wonder what the returns policy is @ the Silk Market”. He had a great reply: “Man, if they’re willing to exchange underwear….if they’re willing to do it, do your really want to?”

For the sake of the experience, I marched back to the third floor, back-corner and the woman remembered me with a smile. “Will you please give me a larger size?” I asked.

The answer was YES, and I have 5 pairs in size XL!

Beijing Silk Market

The conference ended on Tuesday — Steve and I saw presentations from a number of companies and met with an interesting, small (~$10MM in annual revenues) Chinese gaming company based in Xi’an — and joined some of the Rodman & Renshaw folks in a trip over to the Beijing Silk Market. Rather than wait 30+ minutes for a cab, we trekked over via subway, which was crowded, but very cheap (~$.29 for a ticket) and efficient.

The market itself was amazing. Wikipedia puts the store-count @ 1700, so we’ll go with that. Floor after floor of vendors in stalls about 10 feet by 10 feet in size selling goods ranging from t-shirts and jeans to scarves, sportswear, handbags and suits. There are amazing deals to be had as long as you’re comfortable haggling — and I mean haggling — with the vendors. Often times in business, I don’t like aspects of hard-core negotiating — I’m more of a lead with a # that’s reasonable kind of guy — but the fun part of buying things at the silk market is fighting with the vendors to reach a deal.

Worth noting is the reckless disregard for Intellectual Property — most of the “brand name” items there are counterfeits. Brands ranging from Polo Ralph Lauren, Dolce & Gabbana, Giorgio Armani, Paul Smith and dozens of other are attached to various products in the stores with the knock-offs selling at a fraction of the regular price. You can read more about that here, if you’re interested.

I did some shopping! I picked up a couple of suits, 2 dress shirts, 3 ties, a bunch of other stuff, and a “Swiss Army” luggage set — a large bag and a matching one in carry-on size.

Exiting the market, we were approached by a kid selling pirated DVDs — name the film, and you could buy a DVD for about $2. I was also chased into the taxi by a woman on the street selling socks — offering 15 pairs for about $7 for various black dress socks (with the “Boss” logo) and white work-out socks emblazoned with the Nike logo. I literally had to get the cab driver to pull away with the door open to get away from this woman!

Bombed in Beijing!

I’m happy to report it’s approaching 6am Wednesday morning and we just made it back to the hotel. We went to the Beijing Silk Market — I’ll post more about that shortly — followed by dinner and drinks on the top floor of the Park Hyatt Beijing. Incredible view of the city! We then had another drink at more of a “local bar” and then stumbled over to Club Mix. For 4am on a random weekday, the place was hopping!

My head is still pounding from the music, but I didn’t drink too excessively, so I’ll be OK after a little sleep.

China Update – Day 4

It’s Tuesday morning here in Beijing — last day of the conference. Yesterday was awesome — the day began with some opening from Rodman & Renshaw’s Chairman of the Board, Wesley Clark, who introduced keynote speaker Colin Powell (by the way, how many of you knew Powell’s middle name is “Luther”?).

It doesn’t get much better than Colin Powell! He gave a fun, thoughtful, self-deprecating talk, but despite his down-to-earth demeanor, you could feel a deep level of compassion and gravitas. I had the opportunity to shake his hand and get a quick picture and I whispered to him that I was also of Jamaican descent (on my Mom’s side), and he gave me a quick smile.

The Rodman event itself is not unlike other investor conferences I’ve attended — an executive from the company presents a brief overview on the business, key metrics, and other details on the business. As all of these companies are public, there are additional details and filings with the Securities & Exchange Commission (SEC).

Two general comments: First, it sure is interesting to see capitalism and the entrepreneurial spirit alive and well in China! And second, there are definitely some interesting value plays of Chinese companies trading on American public markets. Some of the better deals have substantially lower P/E ratios than comparable American companies. I only have positions in 4 Chinese companies (see link), but come away from this event feeling very good about expanding my Chinese portfolio.

Adventures in the Forbidden City

It’s late Monday evening here in Beijing and I just returned to my hotel room from a “gala dinner” at the “Royal Palace of Forbidden City Taimiao Ancestral Temple“. Describing it as “incredibly cool” doesn’t do the event justice! (It was not only “cool”, it was downright freezing — it must have been about 20 degrees out and windy!)

One very interesting “only in China” experience to share: Lionel Richie was the night’s featured entertainment — rumor has it he was paid $700k to show up and play. I’ll mention that Richie showed up probably 30 minutes later than he should of — had he realized how the right would end, I think he’d have arrived earlier. The main reason his tardiness mattered is because the party was in an enclosed tent — similar to what you see used for outdoor weddings — which did a little to protect us from the elements, but it was objectively cold!

So I’m right up against the stage — literally in the front row — toward one of the sides and Richie warmed up with a couple of old “Commodores” songs before rolling out “Dancing on the Ceiling” followed by his classic, “Hello”. Off to our right, we noticed Richie’s producer mouthing “one more….one more” running his hand across his neck — the international symbol for “cut it off”. Apparently the authorities not so subtly asked that the band wrap up — literally it was about 11pm and he couldn’t have been more than 1/2 way through his set. Richie wrapped up with “All Night Long” and did the whole “good night, you’ve been great” thing expecting to come back for an encore….But it wasn’t to be….whether it was an imposed curfew, his YouTube references (remember, YouTube is blocked by censors here), or some other reason — the Chinese government can, and does, do anything it wants — the concert was over!

Monday morning began with a keynote address by General Colin Powell — he was awesome, and I was thrilled to have the opportunity to shake hands and get my picture taken with a true American hero!

China’s “One-child” Policy

Attending a tour of a company called China Cord Blood Corporation (NYSE: CO) on Sunday, I was reminded of China’s one-child policy. Essentially, in order to manage population growth, the Chinese government prohibits many married couples from having more than one child.

China Cord Blood, based in Beijing, is a cord blood bank, providing storage services of umbilical cord blood stem cells from newborn babies. As with cord blood banks in the US, parents pay a one-time fee for initial processing when the baby is first born (CCB charges ~$735), and then an annual fee (~$91/yr) for storage. The premise is that stem cells can be applied toward regenerative medical therapies for Leukemia, Type 1 Diabetes, brain injury, stroke, etc. I knew a little bit about the business from of an SEO project I took on several years ago for Family Cord — at the time we helped get them to page one in Google on the term “cord blood”.

The executive from CCB specifically cited the one-child policy as a key driver of the business. Because so many Chinese families are limited to one child, parents take extra precautions — such as cord blood storage — to ensure their progeny’s health.

Another company presenting at the Rodman & Renshaw conference, China Education Alliance (NYSE: CEU), also mentioned the one-child policy as a revenue driver. CEU’s primary business is test preparation services for 6-18 year-olds. Obviously, as many families have only one offspring, the parents dedicate all resources to that one child. The Chinese take education very seriously — education expenses are the third largest expense in a family’s budget, after food and housing.

Back in January, I read an article about the shortage of women in China and some of the social problems arising out of the one-child policy. So it was interesting today to hear about the business impact from the Chinese government’s “family planning” mandate.