Straszheim Breakfast A Resounding Success Noted Economist Gives His Economic Outlook Presentation on China's Emerging Market

With certainty in the determination of the presidential election, noted economist Donald H. Straszheim gave his 'Day After The Elections' financial outlook presentation at the Coral Reef Yacht Club in Coconut Grove. Speaking before a full audience and overlooking Key Biscayne, Straszheim's focus was centered on the potential that China has to offer American investors.

Straszheim spoke first about China's financial institutions. China's "Big Four" Banks -- Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China -- are themselves undergoing fundamental change. China kicked off banking reforms at the end of 2003 by injecting $45 billion into Bank of China and Construction Bank, preparing them for an onslaught of foreign competition once the sector is opened by 2007. But changing the culture at Chinese banks, which employ hundreds of thousands in branches in every corner of the world's most populous nation, will not happen overnight.

"China's banks still do not operate like banks," Straszheim, the chief executive of Straszheim Global Advisors, warned. "They are lending arms of the government."

Straszheim believes that China will prove itself a fertile ground of entrepreneurship and opportunity in coming years. But even an optimistic businessmen like Mr. Straszheim admits that many obstacles remain: a lack of transparency in business, a dearth of corporate governance, rampant violations of intellectual property , and an immature financial system.

Still, the potential for growth is the China markets is something that must be closely followed. Strasheim maintained the need for American corporations and financial institutions to have a clear and articulated China investment strategy. He emphasized the American investor does not have to buy a Chinese stock to invest in China. He or she can buy US companies that have exposure to China. And for now, Strasheim noted, that is the best way to capitalize on this opportunity.

"Last year, Wal-Mart imported $15 billion worth of products from China alone. If Wal-Mart were a country, it would be China?s fifth largest trading partner. Volkswagen last year sold more cars in China than in Germany. Starbucks will probably open more stores in China in the next five years than in the rest of the world put together. Two years ago, Home Depot imported 100,000 cargo ship containers with products to be sold to you and me. Next year, the estimate is for 300,000. In the retailing area, in the old days the winners were the best merchandisers. In the new era, the winners in retailing are those who are the best in-sourcers? the best at buying those products from aboard at the cheapest prices. You cannot be a serious investor, in my view, without thinking about China."

Straszheim said the secret to success in the China market is patience and persistence.

"The Chinese are the most entrepreneurial people in the world. I spend about 60 days each year there. 'Let's make money' is the rule that drives China. China will be far more important to our future than Japan has been in the last 20 or 30 years." He also noted that the 2008 summer Olympics in Beijing would spark further changes.

Straszhiem closed his breakfast presentation with some parting thoughts. "Every company in the world sees China as a threat, an opportunity or both. Over the next decade, nothing will be as important as China in defining success or failure for major corporations all over the world."

Coral Gables Trust Company hosted this presentation, the first of many in a series of lectures on the domestic and global financial markets.

R. Luthmann