RealTime IT News

China.com -- Internet Time in Reverse

The US population represents a mere 4 percent of the world population. In other words, there is tremendous potential growth for international markets.

And, yes, this means great opportunities for Web businesses, as well.

Consequently, we've already seen the emergence of foreign portals, such as StarMedia (STRM) (which caters to Latin America) and China.com (CHINA).

While the potential rewards of international Net investing are very lucrative, the risks are high -- such as currency fluctuations and information risks (that is, the difficulty of getting the necessary information on which to base your investment).

But perhaps the most dangerous risk is politics. International investing is littered with examples, like Castro's nationalization of Cuba's private interests.

Well, as we approach the end of millennium, such outright takings of private property are not common at all. Rather, there are more clever ways.

Yesterday, we got the first taste of this with China.com. The stock plunged 13-1/2 to 63-1/4. The Chinese government is threatening that it will, simply put, not allow any foreign investment in Internet companies.

Unfortunately, such actions will ultimately slow the growth of the Net in China. China needs huge amounts of capital to build an infrastructure that wires the country for Web access. Also, Web companies usually have high burn rates and thus a need for external sources of capital.

As it stands, the Chinese financial system does not have the critical mass to allow for a comprehensive Web build-out. So, China will need to access the capital markets of the US and Europe.

The actions by the Chinese government are troubling. As an investor, I would stay clear of China.com or any other Chinese-based Web company (China.com is headquartered in China).

I would not be surprised if the Chinese government makes other such restrictive moves. With the tremendous growth in the Web and its profit potential, it becomes very tempting for governments to take advantage of things.


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