Being cautious during the China rage

Investing in China is all the rage nowadays.

I was over there in 1994 working on a joint venture investment deal, and thought things were done more than a bit funny. During due diligence for the JV heavy manufacturing operation, it seems the further we dug the less assets existed. And the liabilities went in the opposite direction. I never got a straight answer out of anybody, but one thing was for certain: the investment from the US side wasn’t going to change no matter what deficiencies we found on their end – the Chinese management made that very clear up front.

I am sure things have changed a bunch since then, or have they?

Venture capital firms have been pouring money into Chinese startups for a while now. They use complex legal structures to ensure assets are owned by entities they can control, audit, and eventually take public in decent markets.

But who cares about all that, when all the Chinese government has to do is change the rules.

It will be interesting to see how this all plays out.

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