Mark Zuckerberg shouldn’t lose too much sleep about China’s Facebook beating him to Wall Street.
Renren Inc. is the first social-networking website to go public in the U.S., raising $743 million with which founder Joseph Chen can tap China’s 1.3 billion people. China is a market Facebook Inc. has yet to friend and the U.S. equity market is a place Zuckerberg has yet to tread.
Here’s the thing, though. Renren investors are paying a huge premium for future spoils -- the belief that China will grow 10 percent indefinitely. To do that, the country will have to upgrade its economic software.
This vital bit of re-engineering isn’t unfolding on schedule and China’s undervalued currency is partly to blame. It stifles incentives for the Zuckerberg and Chen wannabes out there, imperiling the nation’s outlook.
It sounds counter intuitive that the anchor of China’s success in raising living standards over the last three decades now is holding it back. As China enters the age of an Internet it obsessively censors, the yuan has lulled officials who must move the economy away from manufacturing that relies on cheap labor. The longer the currency is artificially weak, the more difficulty China will have nurturing the innovation vital to its future.
Stay tuned for more on this one..
CJ Henderson Global Financial Partners
