Dot.com Bust Redux? China Style?
Posted by Dan on December 28, 2007 at 07:03 AM
Very good, very interesting, article in today's Washington Post by Ariana Eunjung Cha, entitled, "Tech Boom Sweeps China, But Some Sense a Bubble." General thesis is that there are plenty of good places in China for venture capital (VC) funds to put their money, but valuations are sky high right now:
Some fund managers are wary of what lies ahead in the short term, however, and worry that China is creating a tech bubble similar to the one that burst in the United States at the start of the decade. But venture capitalists, entrepreneurs and competitors point out that Silicon Valley remains a prominent tech center, despite the bust. They say the tech sector in China, which has an estimated 162 million Internet users, will be a force to be reckoned with.
I think all of this is true.
Comments
Money, especially VC and PE money goes to where it thinks it will find the best ROI. Part of this has nothing to do with China; it has to do with the continuing fall of the US dollar in which most funds are denominated. There is a rush to get out of US dollars and into yuan, which is now seen as a stronger currency than the US dollar.
Excess money-flow into the Chinese yuan will naturally mean a larger proportion of lower-quality investments going into China.
Posted by: Paul Denlinger | January 1, 2008 8:29 AM