In the U.S., we got Elvis. In China, we got Jim Rogers.
It might not be in the consciousness of the Quantum Fund co-founder to overtake the stardom of his more famous partner George Soros, but he did find his rock star status in China. At the 2007 Global Chinese Financial Forum in Shanghai, the constant manic mob scene around Mr. Rogers says a lot about how people in this fastest growing economy view him as some kind money-printing god. The heat generated by people pushing each other pretty much nullified the effect of full-blasting AC.
When the commotion settled a bit, the circus started. I mean the keynote speech. Two minutes into his speech, Mr. Rogers stopped abruptly. He caught some poor guy whispering on his cell phone in the front row and demanded the person leave the auditorium immediately. The person refused to leave and Mr. Rogers refused to continue. A deadlock lasted five long and awkward minutes. Finally, the poor guy buckled in the stare contest.
If you read about what Mr. Rogers said in the past couple of years, there is no new news in his speech this time. It can be summed into four investment themes: long commodity, short bonds, long China, short U.S. dollar. The first two have been discussed rather extensively in the previous posts, and the last two are everyday conversations. When discussing the raging stock markets in China, he thinks a hard landing is very likely in the next 1-2 year. For sectors, he prefers railroad, agriculture, and food industry.
The Q&A session was the epic of the event. The first question was asking Mr. Rogers how the universe was formed. It looks like that some think the money god played a role in Creation. All other questions are variants of which Chinese stocks and when he recommends the rest of us to buy. It was quite educational to hear what’s on people’s mind.
Mr. Rogers did offer some genuine advice for fellow investors:
1. Always look for disasters. Those are where opportunities lie, e.g. the safety crisis among Chinese food manufacturers.
2. Watch where the government spends huge sums of money. For example, tourism, railroad, agriculture, power generation, air pollution, water shortage, and etc.
3. Last but not least, learn Chinese.
Tuesday, July 31, 2007
Friday, July 20, 2007
Coffee Bean in Shanghai
July in Shanghai feels like a gigantic outdoor sauna. At 90F, the locals considers it the hottest days in a year. For someone from California, the temperature is tolerable but the humidity makes it hard to breathe. It reminds me about the summer time in Atlanta. It would be natural to think that cold drinks sell fast in a hot day, but surprisingly it takes quite a bit effort to find typical cold beverages, including ice water, that we take for granted in the U.S. That’s because in China traditionally cold food and drink are considered unhealthy, so you are most likely to find hot milk, and warm cola for sale.
At a street corner, I spotted a familiar name, The Coffee Beans & Tea Leaf, an LA-based chain. The Saturday morning coffee shop gathering culture has not yet been imported from the U.S. There were six staff and few customers. The freshly brewed Columbia drip tastes not only authentic but pure. Apparently the water used to make coffee here is not from the regular water source in Shanghai, which is notoriously foul tasting. Simple put, it makes everything taste like detergent, perhaps due to all the chemicals put in to kill the bad stuff in the Huangpu River.
A large drip coffee costs RMB 20 (roughly US$ 2.64), 50% more nominally than that in the U.S. It made me wonder why such a high price in a comparatively lower wage country, despite that the labor cost is so much lower here. One possible explanation is that premium coffee is marketed as a luxury product, which is tailored to people who want to express their higher-than-average status and taste, therefore charging more would let them affirm such association.
Does the luxury product marketing psychology really have a play here? Let’s first take a look at the economics. To make a comparable estimate, we need to also factor in the import taxes. The current import tax on coffee is 15% and the import value-added tax is 17%, an effective tax of 34%. That’s lowered from the 44% level in 2004. Even after accounting for the wholesale and Chinese domestic transportation cost, there is still a 9% premium. As The Coffee Beans sources directly rather than through a Chinese domestic wholesaler plus the lower labor cost, the extra margin would mostly likely be well above 9%. That perhaps could be the price to pay for a luxury product in China.
At a street corner, I spotted a familiar name, The Coffee Beans & Tea Leaf, an LA-based chain. The Saturday morning coffee shop gathering culture has not yet been imported from the U.S. There were six staff and few customers. The freshly brewed Columbia drip tastes not only authentic but pure. Apparently the water used to make coffee here is not from the regular water source in Shanghai, which is notoriously foul tasting. Simple put, it makes everything taste like detergent, perhaps due to all the chemicals put in to kill the bad stuff in the Huangpu River.
A large drip coffee costs RMB 20 (roughly US$ 2.64), 50% more nominally than that in the U.S. It made me wonder why such a high price in a comparatively lower wage country, despite that the labor cost is so much lower here. One possible explanation is that premium coffee is marketed as a luxury product, which is tailored to people who want to express their higher-than-average status and taste, therefore charging more would let them affirm such association.
Does the luxury product marketing psychology really have a play here? Let’s first take a look at the economics. To make a comparable estimate, we need to also factor in the import taxes. The current import tax on coffee is 15% and the import value-added tax is 17%, an effective tax of 34%. That’s lowered from the 44% level in 2004. Even after accounting for the wholesale and Chinese domestic transportation cost, there is still a 9% premium. As The Coffee Beans sources directly rather than through a Chinese domestic wholesaler plus the lower labor cost, the extra margin would mostly likely be well above 9%. That perhaps could be the price to pay for a luxury product in China.
Subscribe to:
Posts (Atom)
