Quick Take: China's No Sure Thing

Remember back in the old days when companies in sorta-lawless, developing economies (like China) traded at a discount to well-established peers? Well, those days have been gone a while, with everyone jumping on the China bandwagon, and repeating tattered justifications such as the old "... if we can just get 3% of China ..." or "... think of the costs of labor ...".

While such excuses have been used to try and inflate iffy enterprises from alternative power -- Solarfun (Nasdaq: SOLF  ) and "Canadian" Solar (Nasdaq: CSIQ  ) -- to electronics manufacturers of all types, a short article in the latest BusinessWeek is a good reminder of why investors should be wary of the dragon.

Turns out "old" manufacturers like Motorola (NYSE: MOT  ) and Nokia (NYSE: NOK  ) have dealt effectively with upstarts like Ningbo Bird. The Taiwanese semiconductor biz is compact and centralized, while local politics in China encourage businesses to spread out, hampering management. Even Lenovo Group, which had a huge head start, has struggled, though it builds ex-IBM (NYSE: IBM  ) ThinkPads. Dell (Nasdaq: DELL  ) , Hewlett-Packard (NYSE: HPQ  ) , and other global powerhouses are tough to beat. They can afford to outspend the Chinese on newer, more efficient plants.

It's something every overseas investor needs to keep in mind as the Chinese markets continue to attract more and more speculation.

Seth is a member of the Motley Fool Global Gains team, which scours the world for the best investment opportunities. A free trial will show you what they're watching.

Comments? Bring them here.

At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Dell is a recommendation of Motley Fool Stock Advisor and Inside Value. Fool rules are here.


Read/Post Comments (0) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 527388, ~/Articles/ArticleHandler.aspx, 10/21/2014 3:30:27 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement