A Letter from China - Hsin Y

Hsin had created and sold two computer businesses in Taiwan. He now lives in the US but often travels to China on business. He is an active Spike Member and graduated from a Traders' Camp in January 2009. I am posting his letter without any editing - Alex


1. Gray Economy is unique in China … so most convention economy study for China is not working well.
2. Unlike western world which this time economy crisis affect majority of people, only 1/3 of population in China get affected.
3. China has no debt and lots of reserve … under one party management, decision is faster and enforceable.
4. Most Chinese don’t have debt… most housing value are way above their mortgage, no sub-prime or major credit problem.
Cash flow is tight for SME … but China ‘underground banking’ is at least 200% - 500% more than ‘normal banking’ activities.

Question area:
1. The next 3 months will tell us ‘how much China economy tie into Export’?
2. Can China increase domestic consumption is key to its long term success.

Conclusion:
1. China, compare with others, has least problem on hand.
2. China equity market don’t support ‘SHORT’, most people are ‘buy and hold’ type. Most people lost 60% in equity market and
Still hold on to it à I think it will be a great equity market to trade on.
3. There is a lot of bargain in China… but we need to get into grass root approach to find and understand the real deal.

I think if we low down our investment to US$500K – US$2M, we can find lots of high ROI investment … Difficult to do large deal now, only SOE (State Own Enterprise) has large deal but not trustworthy.

My Interest topic: “ How to measure Gray Economy?”

We can discuss more when I return.

Cheers,

Hsin