This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Caught in the Chinese Web

NEW YORK (TheStreet) -- A few months ago, when Facebook was rumored to be close to a deal with Baidu (BIDU) about setting up a joint venture.

At the time, I said I thought that it was a smart move on the part of Facebook (although the rumors of the day then said it was something that Mark Zuckerberg was insisting on over objections by Sheryl Sandberg). I remember a friend of mine, Bill Bishop, an American venture investor based in Beijing, was very skeptical at the time of such a deal working out. Bill pointed out then on his blog how many American Internet JVs had driven on the rocks of China over the last 5 years.

I was reminded of Bill's thoughts last week when I watched an interview of Qunar co-founder, Fritz Demopoulos, who recently sold his Chinese travel business to Baidu.





Fritz is a German, who got his MBA in the U.S., and then promptly went to China. He started two companies over there in the last 10 years. He has a unique perspective on the country and what it takes to succeed there.

Fritz says flat out in the interview that he doesn't think that any U.S. internet company will ever be successful in China through a JV.

His reasoning was pretty simple. Even six years ago, China's infrastructure was pretty immature vs. the U.S. Remember that was the time when Jack Ma sold 40% of his company for $1 billion to Yahoo! (YHOO). Baidu and Tencent were early days. Sina (SINA) was a boring AOL (AOL)-type company.

When big U.S. brands came to China -- whether MySpace or Google (GOOG) -- they brought capital, know-how and coolness.

That Was Then

Today, things are much different in China. The market is flooded with capital. Any private company with a decent business plan can come up with some money.

There is tremendous technical talent available and it is much cheaper than in the U.S. It is getting a little competitive for the best talent in Beijing, Shanghai and Shenzhen but the costs are still far lower than the U.S. and the supply is very high.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs