Andy Kessler: WSJ: Beijing Duck
Andy Kessler gave me the keenest insights in 1994 when Forbes.com was a gleam in our eye. A columnist for Forbes ASAP he is, in my opinion, the best person writing about technology financing and the markets. He takes on China.
“Their stock market could help. China is filled with entrepreneurs who build companies, not buildings. I spent 10 days in China this month meeting with investors. They are smart and hungry but crippled with Enron accounting. On Jan. 1, listed companies must start releasing two sets of numbers — Chinese earnings and then calculated again using international standards. Many will start to show losses. Ouch. China is scared to open up because the first move might be to short the whole damn country. George Soros has been sniffing around, and they won’t let him in. Outsiders need to be licensed as Qualified Foreign Institutional Investor with a quota — currently less than 1% of total capitalization. Doesn’t sound like a market economy to me. The total value of U.S. stocks is 20 times as large for a reason.”
The hard thing for emerging economies is to avoid scavengers from crawling in. China’s case is quite sensitive, since they are coming out from a communist set of mind (don’t disregard the cultural influence of being raised in a system and changing it all-of-a-sudden) and I think China’s top decision makers fears is to open Pandora’s box way too quickly (eg Russia).
Then there’s corruption, on third world countries highly restrictive policies usually represent the greatest opportunities to take personal advantage by “overseeing” some of the laws and allowing something “illegal”. I’ve seen it happen all too often.