The headlines these days suggest it's harder than ever to do business in the People's Republic. My students are here to help. They've just written proposals on how to invest $1 billion in China and not get taken to the cleaners. They could invest in any sector, from real estate to refrigerators, and in any form they wanted, from joint ventures to going long on copper. My only requirement is that they justified their proposal in light of China's economic landscape, the evolving policy climate, and the enduring political risks.
The result -- a lot of crazy schemes, and a few real gems. Here are the 4 best of the bunch, posted with the students' permission.
Brian Spegele, who will soon be working for the Wall Street Journal's Beijing bureau, suggests forming joint ventures with Shanghai Pharmaceutical and the Jiuzhoutong Group. In stage one, he'll focus on selling generics in the Chinese market; in stage two, export drugs to the developing world; and in the last stage, receive US FDA approval to export drugs to the United States. Since IPR theft is a huge problem, Brian suggests focusing on generics first, but he sees signs protection of pharma patent rights is gradually improving, as is regulatory attention to safety issues. (Download Spegele Pharma) A little too optimistic for your blood?
Adam Molon, who in 2007-08 interned at SouFun Holdings, which is owned by IU grad Vincent Mo, diversifies his billion among three sectors -- the dairy sector, the Chinese Basketball Association, and gambling in Macau. Ingeniously, he suggests purchasing the Yunnan HongHe Running Bulls Chinese CBA team and making it an advertising and marketing vehicle for his dairy company. Milk and basketball -- what could go together more? (Download Molon Dairy BBall Macau)
Abraham Gerber, who is attending IU on a research student scholarship and served as the RCCPB's R.A. during his freshman year (2 years ago), suggests the best opportunity is in China's alternative beverage sector -- "fruit juices, bottled water, bottled teas and coffees, and milk all which have just recently emerged in force onto the Chinese market." He suggests taking majority stakes in several smaller beverage makers in order to avoid the problems that are associated with being minority shareholders in too many companies at one time, the problem that befell Asimco in its early years. (Download Gerber Beverages)
Edwin Way, a terrific Ph.D. student who speaks terrific Chinese and already has an M.A. in political science from the University of Oregon (thank you, Pete Suttmeier), suggests that the best way to avoid the pitfalls of fragmented enforcement of central government policies is to invest in carefully chosen business-friendly regions. His choice -- hop on the "Develop the West" bandwagon and make Chengdu the centerpiece of his investment plans. (Download Way Inland)
An honorable mention, in 5th place, goes to Kent Inglehart, who had the guts to say that directly investing in China opens you up to too many risks and problems, in particular, foreign exchange worries and market access obstacles. Hence, he decided to buy stock off the NY Stock Exchange of China Natural Gas, PetroChina, and the Industrial and Commercial Bank of China (ICBC). Why get jetlag when you can make a mint on China from your bedroom?
Happy reading. If you use any of their ideas and make a mint, send us a check. If you go bust, you should've known better than listen to students.