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Technology Stocks : Deswell Industries (DSWL)

DSWL 3.390

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Nov 7 9:30 AM EST

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To: Steven Yang who wrote (843)	7/26/1998 10:48:00 AM
From: Ron Bower	of 1418

Steven, (OT) My post was that the local Party officials handled the situation in a way that reflects badly on Beijing. I expect these 'locals' to be 'censured' for causing an incident that gives an adverse impression to Foreign investors. It won't matter that the local officials used methods that have always been used - only that the incident has been reported in the International Press. I did not defend Qingsong Du. However, instead of a crime against investors, I believe his crime to be conducting 'Chinese business as usual' (known here as kickbacks). He has been an extremely successful businessman having turned a failing company into a very profitable operation. Asia Electronics is his attempt to combine and grow a group of struggling companies using IPO monies to modernize operations and cut costs. The growth in his businesses very likely required the 'cooperation' of local politicians. One of the problems in China has been the necessary payoffs by business to politicians or military people. Beijing is starting to crack down on this practice. In this case, we have a changeover in the local politicians and the newly appointed cannot accept 'gratuities' as in the past. Because of this, they are more aggressive in their pursuit of past abuses. We now have the old question: Is the businessman that must make a payoff to do business guilty of a crime? In this case, the local politicians have a desire for Qingsong Du to be guilty. When Beijing posted the question about the legality of Asia Electronics public offering, it gave the local Communist Party Officials an excuse to go after him. I believe Beijing was considering loss of tax incentives and perhaps some fines to be levied on the company versus the arrest and detainment of company Executives and an international incident. Per Qingsong Du's wealth - Is it any different in the USA? I can understand $50M of wealth for a businessman quicker than for a rock star or sports athlete. The increasing disparity between the wealthy and the lower income person is world wide. FWIW, Ron

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