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Net giants bet big on China's potential
Investors and companies also complain that the management talent pool in China is shallow, largely because the country has a short history of Western-style capitalism. And the regulatory climate is also different. Connections, through relatives or otherwise, are still important in greasing the wheels of new ventures. And even then, there are limits to what the communist government will allow. Some observers, for example, are convinced that Yahoo wanted to buy Internet portal Sina, but that the Chinese government blocked the move because it did not want the country's largest online media company to be foreign-owned. Yahoo would not comment on that speculation. Upward trends On the bright side, many trends point solidly upward. Internet use is growing at around 5 percent a month, and credit-card penetration in the country's largest cities is growing at about 20 percent a year. Internet use is stronger among China's middle class. And online advertising is expected to grow at 30 to 40 percent a year. Piper Jaffray conducted focus groups with youths in Beijing earlier this year and concluded that ``China's youth are highly wired.'' ``They live on Internet and on their mobile phones,'' the firm said in March. Online gaming also is becoming extraordinarily popular in China, helping drive the advertising market and fueling interest in online investments. The initial public stock offering Aug. 5 by Baidu exemplified the euphoria over China. Baidu is the leading search engine in China, and many analysts believe that it is best positioned to fend off Google, which also happens to be a Baidu investor and is opening a research and development center in China. On their first day of trading on the Nasdaq, Baidu's shares soared 354 percent, the kind of debut not seen since the U.S. dot-com boom. At one point, CEO Robin Li was worth about $900 million, and the company's
stock market value was about $4 billion, even though it had revenue of just $8.4
million in the second quarter. Baidu shares have since dropped from their $153
high, closing Friday at $95.
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