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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (53290)	9/13/2004 4:07:33 AM
From: Taikun	Read Replies (1) \| Respond to of 74559

EP, Outsourcing of IT services to China, India and other Emerging Markets will be the first sector to feel the pinch of a weakening US market. Emerging markets are looking a bit expensive at present and would need to correct a little to be attractive. After that 'ugly' bond auction last week I'm wondering if you see any bond funds good for shorting or selling calls on? Yields have to rise now. T

To: energyplay who wrote (53290)	9/13/2004 12:46:33 PM
From: RealMuLan	Read Replies (1) \| Respond to of 74559

>> Most cars sold in Austraila, Brazil, Argentina, Mexico, Spain and many other countries are either made abroad or made in foreign owned plants. This is a long way from unprecedented. Swedens car industry started by assembling kits of foreign cars, Domestic manufacture such a Saab, developed later.<< energyplay, You have a point. But two of the countries you mentioned are in Latin-America, and they are exactly the examples that China tries to AVOID. China cannot afford and does not want to become Latin-Americanized. Furthermore, none of the above countries have had such a big market, and such a high margin in profit. Car companies usually make 6% or so profit in other market, but they make 20-25% profit in Chinese car market. >>China's choice of the FDI / tech transfer path has resulted in enormous rapid economic growth, and the vast majority of multinational corporations willing to lobby for trade policies favorable to China. << Yes, that policy was correct before China joined WTO, when Chinese weak technology sectors still had some protection against the advanced high-tech flood. And the reason for multinational corporations lobbying for China was that they wanted to get in the Chinese market. And now they have achieved that. Here are some statistics: among all the high-tech exports from China, the share of the product made by foreign-owned/JV companies increased from 70.5% in 1996 to 82.2% in 2002. And keep in mind the total volume of high-tech exports from China has been increasing leaps and bounds during those 7 years. Yes, it is true that China is the world manufacturing “factory”, but this “factory” can only be ordered and commanded by the CEOs around the globe. While almost every CEO on the planet thinks China is so backward in high-tech sector, more and more of them (more than 200 of them) are setting up R&D centers in China! What an irony. China (especially in Zhu’s era) intended to use the domestic market to exchange some new technology. But now the market has gone to foreign companies, but there is NO technology exchanged to China. Since 1985, 54% of all >280,000 patents registered in the State IP office of China are from outside China. And in electronic field, the share from outside China is as high as 80-90%. It is only China’s fantasy that exchanging market with some advanced technology. Foreign companies only want to use Chinese cheap labor, and none of them intend to transfer their technology to China. And BTW, I actually prefer to call a lot of “Intellectual Property right” as “Intellectual property hegemony” or “IP monopoly”<g> >>Let's say you are the CEO of a multinational consumer goods company, and 30% of your profits are due to the low costs and efficentcy of your China based factories, and another 15% due to the low cost sub assemblies for product assembled outside China. China may be only 5% of your end product demand, but that is growing 15% per year, and was a large part of your 5% worldwide revenue growth. Now who has colonized who ?<< Since the core technology is owned by that multinational company, so I would say they are colonizing China. All China gets is to provide some cheap labor, which has plenty of supply on the planet. >>I think it may be a bit early to start worrying about the hollowing out of industry in China..<< Sorry, cannot agree<g>. It is high time to worry about it before the Chinese industry is hollowing all out. It has already hollowed out 80% if not more. The only way to change the momentum is for China to set up its own technology standard. It won’t be easy, and full of challenges, such as the WAPI fiasco. But it is possible. Take the China’s own AVS standard for example, MPEG2 charges US$2.5 for each product, while China’s own standard only charges US$0.2. This alone will save millions for Chinese companies and consumers. And TD-SCDMA has brought down the WCDMA 3G cost tremendously too (WCDMA has indicated that their tech. patent fee will not exceed 5% of the cost of a product. And China now has been working on its own standard strategic plan on RFID, IPV6 and LINUX too.