Alibaba

(19-08-2021, 12:45 AM)Wildreamz Wrote: Alibaba has a custom chip division (Pingtouge) since 2018: https://equalocean.com/analysis/2021040716142

How it compares to AWS I can't tell (probably inferior, AWS is the industry leader, and Amazon has a much higher R&D budget after all).

But Alicloud has larger issues; it can never be compared to AWS internationally, IMHO given general international distrust towards the Chinese government, and potential sanctions from the US government over data security concerns.

As for "hard sciences"; both Alibaba (https://damo.alibaba.com/) and Tencent (https://www.tisi.org/en) have extremely high R&D budget that they plow back into their business for both short-term (e.g. AI) and long term (e.g. quantum computing) applications. Much like their American counterparts.

2c.

Thanks for sharing

https://www.cnbc.com/2021/08/19/lobbying...es-do.html

Think this may illustrate the differences. In China if you are doing a service to society or is a key pillar, it is likely you can function even as a zombie company. However if you are a high growth company but whose revenue leads are questionable to society to the extent it does not benefit, Brother Xi will come after you.

To be honest, if Sea Group, Grab and those investment education companies which advocates leveraging on properties to earn money had set up shop in China, i think they will have fallen foul of the China's rules in earlier discussions and will be gone. Hence Singapore's model is closely similar to US where "the government often acts as a servant to business interests"

(19-08-2021, 02:49 PM)CY09 Wrote: https://www.cnbc.com/2021/08/19/lobbying...es-do.html

Think this may illustrate the differences. In China if you are doing a service to society or is a key pillar, it is likely you can function even as a zombie company. However if you are a high growth company but whose revenue leads are questionable to society to the extent it does not benefit, Brother Xi will come after you.

To be honest, if Sea Group, Grab and those investment education companies which advocates leveraging on properties to earn money had set up shop in China, i think they will have fallen foul of the China's rules in earlier discussions and will be gone. Hence Singapore's model is closely similar to US where "the government often acts as a servant to business interests"

That's all fine if shareholders get to keep fairly earned profits. lol. Hard to decipher.

Honestly, I do not have confidence in most big-names investors recent foray into Alibaba, and China in general. The one name I trust to understand the rule of the game in China is Li Lu; and it is not clear to me, if he still holds any position in Alibaba (since he is not required to disclose them, if he holds them through 9988.HK).

Heard a take that Alibaba is the most "consensus contrarian" pick in recent memory.

I had to agree. I don't think the risk is fully appreciated by recent investors.

(19-08-2021, 02:49 PM)CY09 Wrote: https://www.cnbc.com/2021/08/19/lobbying...es-do.html

Think this may illustrate the differences. In China if you are doing a service to society or is a key pillar, it is likely you can function even as a zombie company. However if you are a high growth company but whose revenue leads are questionable to society to the extent it does not benefit, Brother Xi will come after you.

To be honest, if Sea Group, Grab and those investment education companies which advocates leveraging on properties to earn money had set up shop in China, i think they will have fallen foul of the China's rules in earlier discussions and will be gone. Hence Singapore's model is closely similar to US where "the government often acts as a servant to business interests"

It seems that you don't have good impression of Sea and Grab.

May I ask why? It seems that they are delivering real value for society, though, I may not agree with all of their strategies (gamification of ecommerce). But I recognize that it works.

On a related note, Jack Ma once famously said he "would rather starve to death than live on games."(https://www.fool.com/investing/2020/08/2...g-busines/). Before changing his tune, to add gaming (including gamification) into Alibaba's ecosystem, and to increase the stickiness of his ecommerce platform.

I think, there is room for some nuance here.

Its their strategies not the delivery of service. Their plan is to be the market leader with pricing power after killing off their competitors. From then, it is a path of profitability by raising platform fees (as seen in the case of Grab once uber left the scene). This is where the chinese government disapproves of companies employing this strategy ("Sustainable competition (no anti-competitive practices)")

Sea Group is making wider and wider losses as e-commerce revenue grows, this demonstrates negative margins to increase GMV. It is apparent their strategy is similar to Grab- once Lazada raises the white flag, delivery fees will be increased, platform fees will appear and shopwide discounts will disappear

(19-08-2021, 04:48 PM)CY09 Wrote: Its their strategies not the delivery of service. Their plan is to be the market leader with pricing power after killing off their competitors. From then, it is a path of profitability by raising platform fees (as seen in the case of Grab once uber left the scene). This is where the chinese government disapproves of companies employing this strategy ("Sustainable competition (no anti-competitive practices)")

Probably applies to Grab more than Sea (as can be seen from their Grab Food and Taxi business).

Also I disagree that, that is their only strategy; Shopee knows it will never defeat Lazada (Alibaba) by burning money alone; Shopee is leading Lazada so far by better execution (more sticky gamification, more stable website, more consistently lower prices, much better localization, better payments infrastructure etc.). Sea may have negative net margins (narrowing every quarter), but positive (and expanding) gross margin and free cash flow. They are executing well and firing on all cylinders.

(18-08-2021, 09:20 AM)Wildreamz Wrote: I wonder if Chinese Government will do anything at all to stop capital flight.

Even their few allies/foreign investors left (e.g. Temasek) are feeling the burn, and might reconsider their relationship (at least, having financial exposure to China).

Chanced upon this article from Global Times

https://www.globaltimes.cn/page/202108/1231649.shtml

"China will promote steady growth in consumption, take more effective measures to open up to boost foreign trade and investment, and maintain steady economic performance, Premier Li Keqiang said at a State Council executive meeting on Monday."

https://www.bbc.com/zhongwen/simp/chinese-news-58265470

Quote:习近平提“共同富裕”和“三次分配” ， 大型私企或成为中国贫富不均的“替罪羊”
中国著名经济学家厉以宁教授曾提出市场经济条件下的收入分配的“三次分配”。
第一次分配是由市场按照效率原则进行分配；
第二次分配是由政府侧重公平原则，通过税收、社会保重支出等进行再分配；
第三次分配是在道德力量的作用下，通过自愿捐赠而进行的分配。

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Perhaps the market needs to start to set realistic expectations, regarding the long-term trajectory of Alibaba (and related tech companies); whether such concentration of wealth and power, is acceptable to the CCP.

Closed out my small (1.5%) position in Alibaba. 

Still hugely positive of the management, the mission, the business model, and the long-term trajectory of Alibaba; but Xi is an unknown factor that I increasingly feel I can't price.

I have learnt a lot about China, and discovered many Chinese experts during the course of my investment (since late Dec 2016); whom I will continue to follow. Good luck to buddies that is long one of the most important, and value-creating companies in China. This is probably a mistake, their fundamentals remains intact, but I'm not confident this will stay the same in the future (which may or may not be determined purely by market forces).

Humbled. Peace.