Asian companies are fueling an economy driven by e-commerce with U.S. dollars, according to a new report, “U.S. Investment in Asian Real Estate 2000,” by Ernst & Young.
The report states that U.S. investors dumped $20 billion (US$) into Asian non-performing loans and distressed assets over the last 18 months. However, not all of the money went directly into e-commerce activities, as Asian companies are using a substantial portion of the funds to build an e-commerce infrastructure.
Jack Rodman, Managing Director of Ernst & Young’s Asia Pacific Financial Solutions practice, said, “The recovery of Asia’s economies and progress in financial-system reform, the accelerated sale of Asian real estate assets and corporate debt, and the explosion of e-commerce are giving more U.S. investors the confidence to increase their equity stakes in the region.”
Building a New Economy
Rather than simply using the U.S. money as a temporary fix, Asia’s financial community is making long-term changes. “Asia is not simply restructuring its Old Economy, it is creating a New Economy driven by e-commerce,” Rodman said.
Rodman predicted that by drawing upon lessons learned by the U.S. as it transformed its economy in the 1990s, Asia should be able to accomplish the same transformation in three to four years. He added, “The pace of change in Asia is quickening as governments and the private sector learn from the U.S. experience.”
“The growth of the Internet, e-commerce, telecommunications and bandwidth will allow Asia to speed the complete restructuring of their infrastructure, financial systems and distribution channels,” Rodman added.
The report said that foreign investments will be used to create a property infrastructure that will include business and research parks to serve new dot-coms and existing e-commerce companies, new distribution centers, and housing for an anticipated influx of Western technology advisors, banks and corporate personnel.
China Goes it Alone
While most Asian companies are eager to take money from U.S. investors to support their e-commerce activities, the Chinese government is making it more difficult for Chinese companies to raise money through initial public offerings.
The government plans to enforce rules requiring all Internet IPOs — including those registered in other countries and backed by foreigners — to be approved by three Chinese agencies before they can offer their shares abroad. If enforced, the rules could hamper the ability of many leading Chinese e-commerce companies to raise money overseas.
However, the new rules have not prevented some companies from expanding into cyberspace. The Xinhua news agency reported Thursday that Chinese PC Maker Legend Group is splitting into two parts: an as yet unnamed traditional manufacturing company and Legend Shenzhou Digital Co Ltd., which will focus exclusively on Internet-based services and e-commerce products.
Hong Kong-based Chinadotcom (Nasdaq: CHINA), a pan-Asian integrated Internet company, announced Thursday that it is expanding its e-commerce reach into China with two partnership agreements. The company will acquire 100 percent of CASTnet, a high-tech software developer that provides Internet and Intranet solutions. It has already acquired a 35 percent stake in Stame.com, a virtual community and game world popular in China.