The gloomy year of the rooster – the WTO column

(soon also in Chinabiz)
I might be revealing a bit of a state-secret here, but I can only do my sad duty. The story wants that the year of the rooster is going to be a pretty gloomy one, according to the Chinese tradition. In Korea, the rooster brings happiness, but in China parents have already been voting with their feet and tried to get their children as much as possible in the previous year of the monkey.
Unconfirmed rumors even say that the government ban on using SMS for fortunetelling was initiated that negative stories on the influence of the rooster on business might hurt the economy. The ban was the cause – together with other reasons – for a slump in revenues for IT companies like sohu.com and sina.com in the fourth quarter and sent their stocks south. That is what you call a self-fulfilling prophecy. In China you can otherwise predict anything, as long as it helps the economy. You cannot talk the economy down, despite all the propaganda on ‘cooling down the economy’.

Of course you cannot use such generic predictions to tell how specific industries are doing. Even in a booming economy, the fortune can quickly take another direction, as the car industry is trying to prove this year. Audi, part of the much-battered Volkswagen Group, saw its sales increase in 0.8 percent in 2004, after two booming years. Mercedes Benz saw an increase of only 5 percent. Bets are that in 2005 the situation might even be worse. When suppliers for the automotive industry euphemistically suggest in their publications that the “Chinese market shows signs of maturing”, you know that disaster looms ahead.
New government restrictions, more competition, unpredictable consumer behavior, all had their influence on the sharp downturn in the automotive industry and nobody will be able to predict what will happen in the next twelve months. And the automotive industry is not alone in this very uncertain market.
In this very unpredictable climate it is rather funny to see somebody like the former securities analyst Henry Bloget starting to advises American investors on China. Bloget got fame during the first internet bubble when as a securities analyst he talked up internet stock. He was shamed out of his job at Merill Lynch when people discovered he kept on pumping air in a deflating bubble, while privately advising investors to run for their money. When people like Bloget start to advice on China, it is better to run for your money right away.

Investors like clear and authoritative advice on where they should put their money. In the case of China general observations like Bloget tries to collect, border to misleading. China is a very attractive market, but only when you know the dirty little details that matter. A good knowledge of specific markets, possible trends and tricks that might help or destroy your business is key for success. Making armchair decisions from the US is the fastest way for disaster.

Fons Tuinstra