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Back to the Global Portfolio mailbag.

Since I'm frequently asked by Global Portfolio readers about various Chinese Internet companies, I want to draw attention to the report issued this week by the

China National Network Information Center

, the government body responsible for registering Chinese Internet domain names. According to the group, the number of Internet users in China doubled in the past six months. To be sure, the total number of 17 million users is still relatively small, considering China's population of more than a billion. But the growth rate growth demonstrates the enormous potential for Internet companies in the world's most populous nation.

Investor enthusiasm, however, has significantly cooled toward China's Internet plays recently. Indeed, two Chinese portals that went public in the U.S. in the past few weeks have performed miserably. Shares of

(SOHU) - Get Ltd. Report

, which according to the CCNIC report is the second most popular portal in China, have dropped 58% since they were first listed on the

Nasdaq Composite Index

July 12.


(NTES) - Get NetEase Inc. Report

, which listed on June 30, and is No. 3, has plunged 52%. However, it is important to note that the rankings of the portals are decidedly unscientific, since they were based on a survey -- which could have been influenced by companies urging users to vote for them -- not on actual visits to the sites.

"With more and more Chinese portals on the domestic market, people are more focused on the winner," says Richard Gao, a portfolio manager at

Matthews International Funds

. "They don't care about No. 2 or No. 3."

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So which is the winner? Gao thinks it will be


(SINA) - Get SINA Corp. Report

. It is the only one of the batch that he owns in the firm's

(MCHFX) - Get Matthews China Investor Report

Dragon Century China Fund. His fund is up 12.7% this year, a 20 point difference over the average return of minus 7.5 percent by its peers, according to



However, Sina's stock hasn't been doing too well lately itself. Its price has dropped 12 percent this month, but it is still 9% higher than the close on April 13, its first day of trading. Last week, the company reported better-than-expected results for the fiscal year ended June 30. The company has probably been hurt this month by an overall lukewarm enthusiasm for Internet companies, but the announcement by the government on July 24 that it plans to tax all commercial transactions over the Internet -- an absurd move at this point in China's Internet development -- certainly didn't help.

Elsewhere in the mailbag, reader

Dan Peirce

enjoyed my

discussion last week of emerging markets debt. He points out the strong performance of another fund over the longer term, the


Fidelity New Markets Income Fund. The fund is up 11% this year, four points better than its peers in the same category, but slightly behind some the other funds I mentioned. "Not bad for an asset class that most people don't know about, and way ahead of emerging market equities," he writes. Agreed, especially when you consider that period includes the financial crises of 1997 and 1998, not a time to be optimistic about the ability of emerging economies to pay their debts. Incidentally, Peirce is right about emerging market stocks: The five-year average return for a diversified emerging market equity mutual fund is 3.26%, according to Morningstar.


David Gitlitz

took exception to my recent

scornful reference to efforts to repeal the estate tax. "The estate tax is probably the tax code's single largest remaining obstacle to marginal capital formation. Its elimination would significantly improve incentives for productive investment and risk-taking, increasing the capital/labor ratio, boosting productivity and raising real wages." He points to estimates by the

Institute for Policy Innovation that repeal would add around $1 trillion to GDP within a decade. It has, writes Gitlitz, "significantly more progrowth implications than your blithe treatment of it suggests you are aware."

I'm skeptical. Of course, you are talking about a period when the huge, overpaid baby-boom generation will begin to die off.

David Kurapka's Global Portfolio column appears Mondays, Wednesdays and Fridays on TSC. In keeping with TSC's editorial policy, he does not own shares in any companies or mutual funds mentioned in this column. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at