[Mb-civic] So, If Mussolini Had Computers--

[Jim Burns]

We would have done business with him, too?

(Between the tyrants of the East, and religious fascists, this, my
friends, is how business in America, has changed...  Capitalism, with no
conscience, is not the American way.)

Excited and Wary, Investors Look at China  
By JOHN MARKOFF
The New York Times
Published: November 4, 2005

SAN FRANCISCO

WHEN Joe Schoendorf, a Silicon Valley venture capitalist, was in
Shanghai a few years ago to hear a pitch from a Chinese start-up
company, he sensed something familiar. He interrupted the meeting,
walked to the window and pulled back the curtains.
"What are you looking for?" he remembers the would-be entrepreneurs
asking. 
"I just wanted to make sure I was in China and not back in Palo Alto,"
he responded.
China's high-technology community, with its brains and competitive
spirit, is probably more like its counterpart in Silicon Valley than any
other in the world. 
Yet Silicon Valley's views of investment in China have tended to swing
between wild optimism and deep anxiety - with the anxiety going beyond a
fear of losing money. Some worry about helping Chinese start-ups move up
the technology food chain. 
These days, the Valley venture capitalists are sharply divided in two
camps: one rushing into China and one holding back.
"The Valley is excited and it's scared at the same time," said Richard
Shaffer, editor in chief of VentureWire, a venture capital newsletter
publisher. 
The dominant perspective is that China is a vast sea of opportunity,
from its low-cost skilled labor pool to its enormous consumer market
that is more than one billion strong. 
In fact, it is now routine for venture investors to demand that their
start-up firms place the bulk of software development and manufacturing
efforts in China or India. (A supply chain problem at a manufacturing
arm in China, however, can easily ruin financial results in any given
quarter.)
For China skeptics, the concern is that American investment will help
energize a formidable competitor, which could come to dominate both
markets and technologies.
The fear is based in the Valley's complex relationship with China as
supplier, partner, customer and competitor. Most venture capitalists say
this evolving relationship will define the future of the Valley and
maybe even technology development in the United States.
The Ningbo Bird Company is one case in point. It went from being a
contract manufacturing supplier for Motorola to being a serious rival in
the Chinese handset market in a matter of a few years. 
Still, last year, most of the Valley seemed to throw caution aside as
venture firms invested nearly $1.3 billion in China, up nearly 30
percent from 2003, according to Zero2IPO, a venture capital research and
consulting company based in Beijing.
But in the first half of this year, investment slowed drastically after
several changes in Chinese securities regulations. Those new rules
caused "a decline of 50 percent in the first two quarters," said Dixon
Doll, managing director of Doll Capital Management, based in Menlo Park,
Calif. 
The lull is ending, though, in part because of the high-profile success
of the initial public offering of Baidu, a Chinese search engine company
that was able to raise $86.6 million in August, and a securities rule
change in October. In September, Sequoia Capital, a major backer of
Google, was reported to be planning a $200 million fund and hiring
several employees in China. 
That announcement followed an earlier joint agreement this summer by
Accel Partners, a leading Silicon Valley firm, and the International
Data Group to set up a $250 million fund.
There have even been reports recently that Kleiner Perkins Caufield &
Byers, the Valley's highest-profile venture firm, was creating its own
China fund, though people briefed on the firm's plans said that was not
true. While Kleiner has recently added Colin L. Powell as a partner to
serve as a "rainmaker" in Asia, it remains concerned about changes in
Chinese security laws that could complicate the return of investment
funds to the United States.
Mr. Schoendorf, who is an Accel partner, sees benefits in helping China
to become a fierce new competitor. He likens this moment of anxiety and
promise to the 1970's, when Japan began to compete successfully with the
United States.
"The Chinese graduate more engineers than we do," he said. "They're
smart, they work hard, and so the only way to compete with them is to
remain more innovative."
  
Copyright 2005 The New York Times Company