Walter Hutchens’ Blog

China’s securities markets continue drifting down, hitting six-year lows this week.

There is obviously a huge disconnect between China’s overall growth story and the performance of its stock markets. One reason for that ostensible paradox is that the growing parts of China’s economy aren’t the parts listed on the stock exchanges. China’s markets do not to get funds to promising entrepreneurs; they mainly exists to funnel some cash to some state-owned enterprises. And those enterprises are not subject to much market discipline before or after they list. So the companies, and consequently the markets, are stagnant even as other parts of the economy surge ahead.

Surely there is a consensus that planning doesn’t work as well as markets. If China stopped trying to plan who should get capital through its stock markets (mainly through government approval requirements for listings) and put those decisions in the hands of entrepreneurs and investors, they’d be more likely to get capital to firms that will add value, the ones that will help China continue to grow.

But even if Wen Jiabao agrees with that, there will be undesirable consequence to creating such “real” markets. Who’s going to chose to invest in an SOE if they have a choice? If investors have choices, these 6-year lows might be the highs going forward for currently listed companies.

That is a cost China doesn’t seem ready to pay. (Whose interests are being protected by not harming the status quo is another issue). So instead paying the cost of letting the existing markets collapse, they are paying the cost of foregone opportunities. Many of their best and brightest people can’t raise money that might help them build firms that might help make China strong and prosperous.

I don’t know a costless way out of China’s dilemma, and I don’t think anybody in China does either. Growing out of the plan may work for the overall economy, but there is no alternative Chinese stock market that is flourishing while the ones in Shenzhen and Shanghai are inert.

A China Daily story on the market doldrums is here

One reason I like keeping my journal as a blog is that I can include images in my posts. But a current frustration for me is that Picasa, the software I use to manage my photos, doesn’t have a feature to send photos to my blog which is kept with TypePad.

Picasa sends photos to Blogger easily–just a few clicks. Blogger and Picasa are both properties of Google, so they interact nicely, but TypePad and Picasa do not.

Thus tonight I’ve been experimenting with Flickr, a site for online photos that has a “blog this” button that does integrate with TypePad.

I really like Flickr’s ecumenicism with regard to what blog-writing sites it will post photos to. But I don’t think I’ll abandon Picasa in favor of Flickr for that reason. I am quite happy with Picasa, and I don’t want to keep my photo collection online. I just want Picasa to post to my blog maintained through TypePad!

David Barboza writes about large-scale Bank robberies in China for the New York Times today, noting “These are inside jobs: top executives, branch managers, loan officers and thousands of everyday employees have been running off with billions in customers’ money.”

The article is availale online here.

Elaine Chan writes in the South China Morning Post that, “China may approve the first batch of three to five listed companies to float non-tradeable state shares as early as May[.]“

The article is available here.

The source of this speculation is the head of a PRC consulting company who has talked with CSRC leaders.

The articles quotes the skeptical reaction of PRC a analyst who observes, I think correctly, that actions which will push down prices in the already-depressed markets are unlikely.

I would further note that making state shares liquid has been under discussion about as long as they’ve been talking about making the RMB freely convertible, allowing more private and foreign-invested companies to list and reducing government approvals. Modest refoms have been made on all those fronts, but the main story is resilience of the status quo. I don’t know why we should expect any meaningful change by May. Even modest experiments might alarm investors (as the CSRC’s earlier efforts to require that 10% of secondary issuances be comprised of state-shares sold to fund the national social security fund).

Personally I imagine the more likely kind of experiments will continue to be approvals for off-exchange transfers of blocks of state-owned shares, not the listing of those shares on public markets.

The article notes Wen Jiabao has been publicly commenting on the importance of helping out the stock market.

Chinese commentators have dubbed Wen’s recent comments on the stock markets “Wen’s 6 Articles” (here, for example). This is a cute reference to the State Council’s 9 Articles, a set of broad policy pronouncements on China’s stock markets adopted in 2004.

The markets rose a little after Wen’s cheerleading, but it hasn’t been sustained.

The New York Times and a number of other sources are reporting that Zhang Enzhao, former president of China Construction Bank, one of the big four PRC banks, is named in a US lawsuit for allegedly taking bribes in China. The Times report is here.

The suit was filed in the US against an American firm by a PRC company claiming it didn’t get its “commission” for helping the US firm obtain business from the CCB. The lawsuit reportedly led to a PRC investigation which led to Zhang’s resignation.

The articles notes CCB is believed to be first in line among the big four for an overseas share listing.

Today the New York Times carries a brief article by Keith Bradsher critical of the mainland’s handling of Hong Kong. It’s titled In Hong Kong, China Prefers Power to Law.

A group of students at the University of Pennsylvania Law School seek to establish a new journal focused on Chinese legal issues, according to this announcement.

The journal is not yet formally recognized by the school, and it is not clear whether they intend for it to be an online or paper (and online) publication.

Interestingly, they contemplate a bilingual journal.

As a scholar of Chinese law I’d of course welcome a new journal from a top law school focused on the field. There are many, many international law reviews, but it seems the proposed Penn publication will be the only American law school journal focused on Chinese legal issues.

Existing journals that are closely related include the Columbia Journal of Asian Law (formerly the Journal of Chinese Law) and the University of Washington’s Pacific Rim Law & Policy Journal. However, these outlets have obviously given themselves mandates broader that just Chinese law.

Certainly Chinese legal issues are important enough–and bountiful enough–to merit a prominent journal focused on them, and Penn’s stature would make their journal an attractive outlet.

But I am not sure how bountiful the supply of quality articles on Chinese law is. In the English-speaking world there are not many scholars of Chinese law.

There are particularly few on traditional law school faculties. There are perhaps 15 scholars of Chinese law in US and Canadian law schools. Only a few of them publish regularly. Those who do may have a preference to have their work published in more general or longer-established journals.

Because the new journal has broadened its scope to include Chinese language manuscripts and may be published only a couple of times a year, probably an adequate supply of articles can be obtained. But it may not be as easy as the students imagine.

The polymath, frenetic Judge Richard Posner wrote an interesting screed Against Law Reviews recently, arguing that the current publishing system for legal scholarship is bad in several respects but that we’re probably stuck with it.

If we are stuck with the current system, there are at least efforts afoot(-note?) to make things more tolerable. A group of prominent law school reviews issued this joint statement recently, announcing, in effect, that they want to reverse the trend of law review articles growing ever longer.

Both as a reader and as prospective writer of law review articles, a call for shorter articles sounds great to me; I applaud this effort.

However, I find some amusement in the spectacle of uber-elites holding hands in an effort to stop themselves from running long, tedious articles. Maybe there’s a 21-step program for them? Also, I wonder: are there anti-trust implications for this joint action? Won’t this action undercut competition in the marketplace for ideas?

That could be the subject of a long, tedious, overly-footnoted article.

Other commentary on the joint statement is here.

My brother bought a digital camera today, in advance of his trip with his sons next week to Disneyland. He got a Casio Exilim EX-Z55. He paid $299 on an open-box special, which looks like a good deal. Newegg, a discount internet store, currently lists it at $370.

David called me for live consultation. I don’t know much about cameras but it was fun talking about his purchase with him.

He first called from Wal Mart, looking at a 7 megapixel Sony. I was able to check online and tell him the price ($397) wasn’t any great discount but that no doubt it is a very good camera. We talked a bit about the advantages of more megapixels, about how more MP’s help with the clarity of enlargements and big prints but seem wasted on most photos that are put on the web or emailed.

I suggested he try the camera store near the Galleria, which is where he ended up buying the Casio. He called from there (several times, actually). He looked at the small Sony Cybershots (specifically the T33), the Pentax Optio S5i (which I have) and the Casio Exilims ( I suggested that he look at those). I was able to check the Internet and my pile of magazines for reviews
as he shopped. He selected the Casio for price and feel.

I think he’ll enjoy that camera. If he doesn’t, he can take it back. The store–a Wolf camera, I think–offers a full refund within two weeks and exchanges within 30 days. Those are nice terms.

Late last year I selected the Pentax Optio S5i mainly for one reason: because Xu Xin, an undergraduate research assistant of mine, had bought one and liked it.
I relied on his endorsement and research. I was then too bogged down in my Tablet PC and Pocket PC purchase to do my own digicam investigation.

I have been happy with the Pentax. Sometimes the auto focus isn’t as helpful as I’d like, and the camera isn’t lightning fast between shots. The battery life isn’t atrocious (my first Nikon Coolpix in 2000 was awful indeed in that department) but sometimes I do get a warning light when I’d rather keep shooting (I have a 1 gigabyte card).

Despite its shortcoming, of all the things I’ve acquired during my recent technology-buying binge (Tablet PC, Pocket PC, Sony U, and my Toshiba laptop), the tiny Pentax camera has, by far, given me the most utility and satisfaction dollar for dollar.

If it shatters on the sidewalk tomorrow, I’d have to say I already got my money’s worth. I’ve taken pictures with it over Christmas, during my January trip to Hong Kong and last weekend in NYC. I’ve taken a lot of shots of Helen, and I captured some nice shots of Maggie and the winter weather. I love that camera!

Next time I’m with David I want to try out his Casio. I think it is a little bigger in terms of length and width  than the Pentax, but it’s thinner. The Exilim line gets positive reviews for battery life and speed.

I’d like to compare. If I like the Casio much better than my Pentax I may have to sell the Pentax (maybe to Helen’s mom?) and get myself one like my brother’s . . . a new Sony is coming out soon, too.

Tonight I checked Andale and found that my old Nikon CoolPix actually has some residual value–$200 or more, which makes it seem worth the time it would take to list and sell it. I may put it up for auction soon, too.

President Bush has nominated Rob Portman, the BBC reports here, to be the new US Trade Representative.

China matters will no doubt occupy much of his agenda.

Bloomberg reports here that litigation has been filed against Goldman Sachs in relation to the loss by China Aviation Oil of $530 million in options trading deals.

While prices on the Shanghai stock exchange have been falling for some time, prices for Shanghai real estate have been escalating sharply, leading central government authorities to try to cool the market.

Mark O’Neill does a good job describing the situation here for the South China Morning Post.

I don’t know how much a square meter of apartment space in Shanghai should cost, but I do know that when the central government orders banks to reign in lending, obtain bigger down payments and raise interest rates, central economic planning is still important in China.

My fromer employer Apple Computer has been making news lately not for its success selling iPods but rather for its fanatical pursuit of the source of a corporate leak.

Recently some websites published items about Apple products under development, and Apple has sued them in order to learn the sources of the leaks (and then presumably to fire the leakers).

Firing leakers who work for you makes sense, but pursing an external third party in order to get to those leakers is a less sound move.

I think this Business Week article, Memo to Apple: Lay Off Your Fans, provides Apple with good advice.

The websites in question–which have probably gotten more hits than ever since Apple went after them–include Think Secret, AppleInsider and O’Grady’s PowerPage.

My HP iPAQ 4700 Pocket PC sold on eBay yesterday. I shipped it to the winning bidder today.

The buyer paid me a total of $477.30. The winning bid for the unit itself was $451. I’d set the reserve at $400 and a "Buy it Now" price of $550 (which probably should have been $499).

She paid an additional $26.30 for shipping (UPS 2nd day air). That included a tiny amount–I think $5–that I added for handling charges.

I actually spent $61.48 to ship the thing to her. However, this included some other items, as I’ll describe below.

PayPal’s cut on the $477 was $14.14 , and eBay’s take (listing and transaction fees) was $18.23.

I bought it for $658.95 in October 2004. I spent a great deal on accessories and software for it (and, God, my time!), but my net dollar cost for the unit alone comes to $243 (659+64-477).

And I actually got another $130 out of today’s transaction by what I suppose is called "cross promoting" merchandise.

When I sent the buyer an email to congratulate her on winning the auction, I offered her a couple of related items.

I offered the iPAQ’s extended battery for $65 (I originally paid $129) and a Sprint PCS cf2301 card for $65 (I originally paid $194 for that–sheesh!).

Of course I would have liked to salvage more, but recent eBay transactions for identical items have been near these figures. Plus, I didn’t have to pay any eBay fees for this follow-on transaction (PayPal took a cut of $4.07 on the $130).

In sum, I recovered $498.56 today.

That’s the good news. The bad news is that this $500 was salvaged by selling stuff for which I paid $981 (actually much more, were I to add in what I spent on software and Sprint’s service–and, God, my time!).

But, to spin it in a positive way, that’s $500 more than I would have recovered if I’d not gotten busy on eBay.

There’s more to sell, too. I still have the ThinkOutide BlueTooth keyboard and the, gasp, that second PPC (which has to be fixed before I can sell it).

If I can get $500 for those things, it will push my total recovery to about $2,300.That’s a good return for the time I’ve put into eBay (though not on my technology "investment" generally, to say nothing of the value of the time I’ve spent on technology since October).

Besides those remaining iPAQ items, I still have a Nextel Blackberry and, sigh, my Sony U.

The U is a big-ticket item. I believe I could sell the U, its extended battery and external CD for $2,500 to $3,000.

That would push my salvage total to $5,000. But if I sell the U, I’d like to buy one of those small Sony Vaio T computers!

The BBC has assembled an extensive collection of articles on China here.

Good story here from the L.A. Times about China’s sluggish, moribund, faltering–I am often tempted to say failing–stock markets.

The couple described in the article say they are “trapped” in the market–they don’t want to sell because they’d lose too much, so they just keep hanging on to shares worth less now than what they paid. I wonder how many millions of traders are like this? If these people decided to cut there losses and move on, wouldn’t that depress current prices even furhter?

And if regulators see it as there job to boost prices (or at least do no harm) for people like these, will they do things good for the long term health of the market?

It sold!

The NEC Versa LitePad–the Tablet PC that I bought back in October—sold on eBay. Better yet, it sold at the highest price that I imagined it could possibly bring–$1,100, plus $45 for shipping and handling.

That was the "Buy it Now" price I established when I set-up the auction. By paying a "Buy it Now" price, someone can pre-empt an auction and immediately acquire the item. I really didn’t think I’d get my "Buy it Now" price.

When I boght the computer, I paid only $1,100, as shown on this record from Amazon.com. When I set up the auction I did a quick online search and found one for sale for $1,200, brand new. I didn’t expect someone to pay me, a stranger, top dollar for a used computer when they could buy the same computer new, in an unopened box, from a merchant (against whom there might be some recourse and less chance of fraud).

Also, the computer is not the latest, greatest technology. It has a Pentium III chip, only a 20GB hard drive, and only 256 MB of RAM.

And for $1,100 there a many good choices for people in the market for laptops and even Tablet PCs.

In fact, I was worried that I’d set the reserve price–the least amount for which I would be willing to sell the computer–too high. I had set it at $850.

With my flat $45 fee for shipping and handling, a  winning bidder would’ve had to pay at least $895. I thought maybe I should have set the reserve price somewhere in the $700 range. I would have been happy with that much, but things turned out better than I expected.

I was in class giving an exam when I saw that the item had sold for the "But it Now" price. I was stunned. I did a double-take. Yes, the screen said "Auction has ended with Buy it Now." Wow.

I was in class until 3:15 that day. I picked up Helen from pre-school about 4:30, after confirming that the sale price was in my PayPal account. I wen to the computer sciences building and bought a copy of MS Office (I had deleted the copy on the NEC during an effort to clean up the hard drive prior to selling it). I then dashed to my apartment where I got the computer, installed Office, glanced at some menus to be sure I’d removed my personal files, and then changed some settings so that certain Office font commands would stop being displayed in Chinese! (That would have probably confused the buyer!). Then I dashed to the business school where I grabbed the NEC CDs that originally came with the computer (I didn’t think I’d have to do any of this for a few more days!). Maggie joined us from the business school. We next drove the the UPS Store in College Park. We got there about 6:15. They told me the UPS drive usually comes between 6:30 and 7:00.

They packed everything for me, wrapping the items in plastic bubble padding. The shipping materials, insurance and surchage for delivery to a residential address came to $62, a bit more than the "shipping calculator" on eBay had predicted, but not too bad.

PayPal deducted $33.51 in fees–about 3%. eBay has assessed fees of $44.15. Thus, I incurred 139.66 in "transaction costs" (fees from eBay and PayPal plus shipping).

Oh–I also paid $90.58 for a new stylus set. I broke the top off the pen that fits in the unit itself and couldn’t find the other one. The set cost $69.95 from MobilePlanet, and I paid $20.63 for FedX shipping (good thing I did!). And the new copy of Office costs me $10 (a tiny amount based on the UMD site license, which I probably was not supposed to transfer to someone else, but, hey, they got $700 from me for a MSDN subscription back in December–just so I could get the Tablet PC version of Windows for my U).

In total, then, I spent $240.24 to sell the computer (eBay and PayPal fees, shipping costs, software and refurbishment costs). Thus, I netted 904.76 for the sale (the $1,145 price minus my costs). That means my cost for having the computer for 5 months was just 209.80!

My daughter drew some pictures on this computer and used the PowerToy puzzle software. It was neat to see her, at 4, using a pen-input computer. It seemed so natural to her, whereas I thought it was exhilerating and unusual.

I first used the Tablet OS with the NEC and generally enjoyed it. It was certainly worth $210 "rent" for 5 months.

What a great start for my eBay adventures.

The Univ. of Maryland was closed Monday in anticipation of a winter storm that turned out to be quite pretty but not too severe.
Posted from my Sony U

Currently my daughter Helen is very "into" in My Little Pony toys. This picture shows how she dressed and "accessorized" the one I bought her Monday, when her school was closed because of snow.

I have already shared this photo, along with many others taken today or late last week, with Helen’s grandmother, aka my mom.

Tonight I sent "Grandmother" the email below. It has links to web pages with more than 60 of these recent "snow days" photos.

I created these web pages very easily. I simply choose the "export as web page" command from within Picasa (Picasa is the free image management software that I am currently using). After I choose that command, Picasa did almost everything else. I didn’t see, much less write, a single HTML tag. It works beautifully.

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