Major private equity players

The Blackstone Group blackstone.com Kohlberg Kravis Roberts & Co. (KKR) kkr.com Texas Pacific Group (TPG) texaspacificgroup.com 3i 3i.com The Carlyle Group carlyle.com Oak Hill Capital Partners oakhillcapital.com

My personality type - test result

Can't believe....

Your personality type is INTJ INTJ: "Scientist". Most self-confident and pragmatic of all the types. Decisions come very easily. These are the most independent of all types. They love logic and ideas and are drawn to scientific research. They can be rather single-minded, though.. 1% of the total population.

WTO Case Challenging Market Access Restrictions in China on Products of Copyright-Intensive Industries

What WTO commitments did China make?

This case focuses on two sets of fundamental commitments that China made in the agreement allowing itto join the World Trade Organization in 2001: (1) trading rights, meaning the rights to import and toexport; and (2) distribution services.

• China committed to liberalize trading rights pursuant to an agreed schedule, with full liberalizationto occur by December 11, 2004. Until shortly before its WTO accession, China had severelyrestricted the number and types of enterprises that could import or export, and it had alsorestricted the products that a particular enterprise could import or export. For the most part,China confined trading rights to certain state-owned manufacturing and trading enterprises, whichcould import or export goods falling within their approved business scope. Under China’saccession protocol, virtually all of these restrictions were supposed to have been removed by nolater than December 11, 2004, at which time all foreign enterprises and individuals were to bepermitted to trade in all goods (subject to certain exceptions not relevant here).

• China made similar WTO commitments to remove restrictions on the distribution of productswithin China. Prior to China’s WTO accession, China had largely reserved product distribution toChinese enterprises, although some Chinese-foreign joint ventures were allowed to distributetheir products in certain circumstances. In its WTO accession agreement, China committed toprogressively phase out restrictions on foreign suppliers seeking to distribute products withinChina, with virtually all of these restrictions to have been removed by December 11, 2004.

Many in U.S. industry consider trading rights and distribution services to be among the most important ofChina’s WTO commitments. In the global business world, trading rights and distribution services arefundamentally interrelated, and are essential to carrying out companies’ business plans.

What Chinese policies are at issue?

While foreign companies and individuals in most sectors are now able to import goods into China withouthaving to use a middleman and are also able to establish their own distribution networks within China,China continues to maintain import and distribution restrictions on U.S. copyright-intensive industries, i.e.,publications (such as books, newspapers and periodicals) and audio and video products (such as newlyreleased movies and CDs, DVDs and video games).

• China continues to reserve the right to import publications and audio and video productsexclusively to a limited number of state trading enterprises, as reflected in several sector-specificmeasures.

• China also continues to maintain an array of measures restricting the rights of foreign entities toengage in the distribution of publications and audio and video products. Under these measures,for some of the products at issue, distribution is limited to Chinese state-owned enterprises. For others, foreign enterprises are allowed to engage in certain types of distribution but facerestrictive requirements not imposed on domestic enterprises. In yet other cases, only Chineseforeignjoint ventures under Chinese control are permitted to engage in distribution.

How do China’s market access restrictions harm U.S. copyright-intensive industries?

• China’s market access restrictions force U.S. copyright-intensive industries to rely on Chinesemiddlemen and agents to do business in the China market, resulting in significantly increasedcosts, poorer product marketing and delivery, and much fewer sales.

• China’s market access restrictions also encourage the rampant IPR infringement occurring inChina. The restrictions delay the entry of new products into the Chinese market and effectivelylimit the scope and quantity of established products available in the Chinese market, providingincentives for pirates to fill the void with their illegal copies.

Why pursue WTO dispute settlement?

• Market access is a very important right in the international trading system, and the United Statesis committed to protecting this right. This includes taking WTO action when it appears that Chinahas not met the market access commitments it made as a condition of joining the WTO.

• The United States sought to engage the Chinese in negotiations to arrive at a resolution.Unfortunately, those negotiations, to date, have failed to resolve our concerns. As a result, theUnited States today took the first step to bring this case before the WTO.

• Under WTO dispute settlement procedures, the United States and China would normally consultwithin 30 days. The United States hopes that these consultations will produce a satisfactoryresult. If they do not, then anytime after 60 days from the request for consultations, the UnitedStates will have the right to request that the WTO establish a dispute settlement panel to examinethe matter.

• WTO dispute settlement rules have facilitated and are assisting us in the resolution of other tradedisputes with China:

1. • March 2004 – After the United States filed a WTO dispute against China challengingvalue-added tax rebates that discriminated against imported semiconductors, the UnitedStates and China resolved the matter during the consultation phase, ensuring fair accessto a market worth over $2 billion to U.S. manufacturers and workers in the semiconductorindustry.
2. • January 2006 – The United States and China resolved a dispute involving China’simposition of antidumping duties on kraft linerboard shortly after the United Statesinformed China that it would soon be filing a request for WTO consultations. Chinaeliminated the antidumping order on kraft linerboard, terminating the unfair barrier to U.S.paper products and benefiting U.S. kraft linerboard mills in 14 states.
3. • March 2006 – The United States, the European Communities and Canada began panelproceedings at the WTO challenging Chinese regulations that impose de facto localcontent requirements in the auto sector through discriminatory charges on imported autoparts.
4. • February 2007 – The United States and Mexico have held joint WTO dispute settlementconsultations regarding several export subsidy programs and import substitution subsidyprograms, which appear to be prohibited under WTO rules. These widely availablesubsidies offer significant benefits, and the export subsidies alone potentially benefitnearly 60 percent of China’s exports of manufactured goods.

2007 FRM's booklist

Title	Author	Publication Press
Options, Futures, and Other Derivatives, 6th ed.*	John Hull	New York: Prentice Hall, 2006
Financial Institutions Management, 4th ed.*	Linda Allen, Jacob Boudoukh, Anthony Saunders	Oxford: Blackwell Publishing, 2004
Probability and Statistics, Schaum’s Outlines, 2nd ed.*	Murray R. Spiegel, John Schiller, and R. Alu Srinivasan	New York: McGraw-Hill, 2000
Fixed Income Securities, 2nd ed.*	Bruce Tuckman,	New York: Wiley, 2002
Value-at-Risk*	Philippe Jorion	McGraw-Hill，2000
Risk Budgeting: Portfolio Problem Solving with Value-at-Risk*	Neil D. Pearson,	New York: Wiley, 2002
Risk Management & Derivatives*	René Stulz,	Mason, Ohio: South-Western, 2003
Derivatives Markets*	Robert L. McDonald,	Boston, Addison Wesley, 2003
Measuring and Managing Credit Risk*	Arnaud de Servigny, Olivier Renault	New York: Mc-Graw-Hill, 2004
Economic Capital*	Ashish Dev,	London, Risk Books, 2004
“Measuring and Marking Counterparty Risk” in ALM of FinancialInstitutions, ed. Leo Tilman	Eduardo Canabarro and Darrell Duffie,	Institutional Investor Books, 2004
Credit Derivatives, Application, Pricing and Risk Management*	Gunter Meissner,	Malden, MA, Blackwell Publishing, 2005
The Risk Management Process：Business Strategy and Tactics*	Christopher L. Culp,	Hoboken, John Wiley & Sons, Inc, 2001
Measuring and Managing Credit Risk*	de Servigny, Renault,	New York, NY : McGraw-Hill, 2004.
Measuring market risk*	Dowd	John Wiley& Sons Inc ，2005
Understanding Market, Credit and Operational Risk: The Value At Risk Approach*	Linda Allen, Jacob Boudoukh, Anthony Saunders	Oxford: Blackwell Publishing, 2004
Risk Management*	Michael Crouhy, Dan Galai, and Robert Mark	New York: McGraw-Hill, 2001
Risk Management and Capital Adequacy*	Reto Gallati	New York: McGraw-Hill, 2003
Theory and Practice of Model Risk Management*	Riccardo Rebonato,	The MathFinance Newsletter, Edition 119, June 20 2005.
Financial Institutions Management.	Saunders, Cornet,	Irwin/McGraw-Hill, 1999
“The Report of the Counterparty Risk Management Policy Group II”, July 27, 2005	A Private Sector Perspective	Toward Greater Financial Stability
The New Generation of Risk Management for Hedge Funds and Private Equity Investments	Lars Jaeger, ed.,	London: Euromoney Books, 2003
Through the Alpha Smoke Screens, A Guide to Hedge Fund Return Sources	Lars Jaeger	New York, Euromoney Institutional Investor, 2005
Asset/Liability Management of Financial Institutions	Leo M. Tilman, ed.,	London: Euromoney, 2003
Risk Budgeting: A New Approach to Investing	Leslie Rahl,	London: Risk Books, 2000
Portfolio Theory and Performance Analysis	Noel Amenc and Veronique Le Sourd,	West Sussex: Wiley, 2003
Funds of Hedge Funds	Sohail Jaffer, ed.,	London: Euromoney Books, 2003

CNY: showing a soaring sign?

Picture provided by: Google Finance

Will the Cornell's tuition be affordable to me at the end of this semester, with the help of depreciation of U.S.Dollar?

A review of Microsoft Bob

Microsoft Bob (v1.00 and v1.00a) is an old and failed product produced by Microsoft in 1995. I guess most people havn't heard of it even some geeks. Even remaining few people who happened to see the big yellow smily face wearing nerdy glasses may wonder :"what the hell is that?" It is true that so few users know it. Why? Because it totally flopped even after Microsoft held a big advertising campaign and loaded up stores with copies of Bob expecting huge sales. So its version number, after only sold out xxx (Gates knows) sets, has been fixed on 1.00 forever. To download Microsoft Bob, click: http://www.winhistory.de/downloads/dateien/MSBOB.EXE (to be continued....)

Some anecdotes about faculty@ORFE.Princeton.edu

Some anecdotes about faculty at the Department of Operations Research, Financial Engineering at Princeton University:

• Chair and Professor Robert Vanderbei, an expert in optimization and probability, also studies astrophysics and works on the Terrestrial Planet Finder. A soaring enthusiast, he served as the Chief Flight Instructor for the Central Jersey Soaring Club for many years.
• Professor Alain Komhauser, an expert on transportation and decision making, ran the NYC marathon with a GPS device in his backpack in Fall 2004. Spectators monitored his progress throughout the race and even communicated with him via text messaging!
• Almost 25% of the graduate students in ORFE are women.
• Recent graduate alumni include assistant professors at Cornell, Stanford, Oxford, and the London School of Economics.
• Professor John Mulvey, and expert on decision making under uncertainty, gave up sailing in favor of golf. Less uncertainty on the links.

My correspondence to a Wharton professor, and his kind reply

More than one year ago (i.e. May 2006), http://www.knowledgeatwharton.com.cn/ ran an article entitled The Road to Privatization in China, in which Prof. Philip M. Nichols's opinion was quoted:

privatization occurs in all kinds of hybrids. The Chinese model is that you grow a private sector at the same time as you maintain the state-owned enterprises. If the state-owned enterprises can’t compete with the private sector, then they are allowed to wither away.

I wrote Prof. Nichols an email as following, expressing my questions toward his opinion:

Dear Prof. Nichols,

.....

While I totally agree with your first point, I think we think the second point on different perspectives. The process of privatization here is a maze far more complex than any one can imagine. The issue of privatization varies from time to time(things are different from now back to 1990's, and 1990's is again different from 1980's) , from place to place(even within China), from industry to industry.

First, do SOEs really allowed to "wither away"? A superficial observation could negate this. And both examples and underlying reasons abound. Many local governments support, financially or politically, agonal SOEs to maintain a good image--Just as in Shanghai Shuixian's case. A more reasonable explanation is that since governments are shareholders of these SOEs , how can they just let their fruits go away? If SOEs die, where is tax income, dividend, and workers' salary? To restructure dying SOEs ( e.g. introduction of foreign strategic investors) is a popular method to rescue them, but they cannot be referred just as wither away.

Far from smoothly moving toward free-market, Chinese governments often regress on the way of privatization. This holds true especially in sensitive industries such as telecommunication, energy, finance, etc. In these areas, private enterprises are redlined by strict regulations. Although VoIP represents an advanced elecommunication tool, Ministry of Information Industry explicitly strangle new-born private VoIP operations, only to secure profits of state-owned conglomerates: CNC and China Telecom. Even in those seemingly already privatized industry, cases also exist: In the recent Beijing Taxi Price Listening, the long-exist problem is exposed to public again: private taxi drivers' interest is in peril from time to time.

Then comes a more intricate question: what is the definition of so-called SOE? Is one state-owned-enterprise really owned by state? Lenovo asserts itself"without connection with China Government", but who provided the original 20,000 RMB in 1984? CCTV asserts itself as state-owned, but where does its tremendous annual revenue go?

I know it is obviously hasty that I draw conclusion from only two of your sentences. But the wide gap between your statement and what I have experienced prompt me to write this letter. Should you are interested in this topic we could discuss it in-depth.

In a couple of days, he replied me with this:

Thank you for your message and for your interest. And for your interesting comments.

I do not want to seem like I am evading your criticism, but I use the phrase "Chinese Model" as a term of art to describe one of the four basic models of privatisation (voucher, public offer, collective, and Chinese Model). These terms were used in a World Bank bulletin in the mid 1990s, and I heard economists using the term "Chinese model" even earlier than that. Personally I do not like the term because it singles out one country, and other countries (such as Uzbekistan) have attempted it, but it is the term that people use so I use it. Personally, I agree with you that the process in China has run into some difficulties. One of the problems that the Chinese model runs into around the world is that it takes so long that vested interests have plenty of time to oppose or reverse the process. I would never pretend to have more knowledge of what is going on in China than you do, but what you describe exposes a fundamental real world weakness of a model that is elegant in theory. I also agree that privatization occurs in hundreds of different forms: the four basic models merely descibe four points on a spectrum and occur in many different ways and can be combined in many different hybrids.

I find your question regarding "what is a state owned enterprise" to be really interesting. The question has been asked from a legal perspective for purposes of things like international trade regulations, but you ask it in a much more practical and direct way. That is a truly intriguing question that I had not thought about in that way. Thank you very much for making me think of that. This is a subject in which I am very interested, and I am grateful for your thoughts.

Thank you, Phil Nichols

Hello everyone!

This is the first airticle of my blog series. Please keep yourself tuned in. Attacks are also welcomed.