Beijing: Welcoming and Entrepreneurial
Seeing China's Growth Firsthand
A Chinese Stock to Bet On
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It's been four years since I visited Beijing last, and not much
has changed. The city still buzzes with energy and the total
Chinese commitment to making a living is undiminished. There are
more cars than before, but they haven't completely eliminated the
traditional bicycles, electric bicycles, scooters, tricycles, taxi
rickshaws and enclosed three wheelers.
A Three-Wheeler Delivers Cardboard for Recycling
Vehicles mostly observe traffic lights, but pedestrians are
definitely second-class citizens--and they know it. Cars barrel
through crosswalks unless there are enough people afoot to assert a
collective right to walk. Mostly it seems to work, but the American
technique of standing your ground and asserting your rights as a
pedestrian (which works well in Boston) would be a risky strategy
here.
The weather in Beijing is extremely changeable, but almost always
dusty, as the Gobi Desert drifts south and east. The sun is usually
reduced to a red ball behind the haze, part dust and part smog, but
sometimes the city will stage a bright sunny day. Mostly, though,
warm weather in Beijing can make you feel like you've just walked
into a room where someone has shaken out a vacuum-cleaner bag. A
friend who has spent a long time here says the government weather
service routinely under-reports air pollution, and that levels
often approach the danger zone. This is not a paradise for runners.
Except for the dust, the city is quite clean, and many
intersections have a person with a broom and a long pair of tongs
whose job is to sweep up and pick up any trash. And every store has
a mop leaning against the front wall to keep the entryway clean.
Tidying Up the Front of a Musical Instrument Store
The biggest business in Beijing is government, an enterprise that's
evident in the number of black Audis and BMWs with smoked windows
that are the clear Big Dogs of the traffic world. There are also
plenty of international-grade brand-name stores that are as glitzy
and sophisticated as anything I've seen in New York, and young
Chinese who are as blithely (and sometimes hilariously) fashionable
as young affluent people anywhere.
But the real heartbeat of Beijing is its tiny neighborhood shops,
stores, eateries, teahouses and other purveyors of every kind of
goods and services. Many of these streets specialize in certain
types of goods, with silk sellers in Dashalin and art and music in
Liulichang. (If the huge number of calligraphy supplies and musical
instrument shops is anything to go by, the popularity of
traditional Chinese fine arts is very high.)
Sample Brushes Displayed by a Calligraphy Supplies Store
Just as most travelers to China learn to say "Ni hao" as a standard
greeting, many Chinese, including small children, have taken to
saying "Hello!" to anyone who looks western. If you find yourself
an object of outright curiosity and stares, you're probably far
enough out of the usual tourist areas to be having a real Chinese
cultural moment.
I did have one beautiful day in Beijing--with blue skies and clear
air--and my wife and I spent that day doing our usual Long March
approach to tourism. We enjoy just strolling around neighborhoods,
looking at ordinary architecture (which in China often involves
tile roofs with interesting contours) and ordinary people.
Unidentified Tree Growing from a Shop Doorway
Much of downtown Beijing is fully developed, and there are fewer
cranes in evidence than on my last visit. But there is reportedly
still plenty of pressure on the traditional neighborhoods (hutongs)
to yield to more modern (and more lucrative) structures. While this
seems like a shame from the point of view of someone seeking the
more traditional China, I had to remember that the residents
themselves often welcome some urban renewal.
The National Palace Museum, still known to most Westerners as the
Forbidden City, is almost a lifelong study in itself. Tours surge
through its vast plazas and small buildings in waves, and it's hard
to get a sense of the whole thing. For my second visit there, I
chose to concentrate on small details. If you look closely, you see
stunning little details that reveal just how much artistry was
devoted to every little nook and cranny. I especially liked this
routinely gorgeous ceramic decoration that sits unnoticed on an
out-of-the-way wall.
Ducks and Lotuses Decoration on a Forbidden City Wall
Beijing is a great tourist city, with excellent public
transportation and a fleet of taxicabs that will, during the day,
take you just about anywhere downtown for a couple of bucks. That
changes somewhat after the business day is over, when many cabbies
will propose much, much higher prices to take you anywhere. You can
almost always find a cab that will still get you where you need to
go using the standard metered fare, but you always have to be ready
to deal with the Chinese entrepreneurial spirit.
I'll write more about my adventures outside the big cities in my
next
Cabot Wealth Advisory
. It would take a book to do justice to Beijing itself. I'll just
close by saying that it's a world-class city that alternately wants
to welcome the traveler with open arms and take money out of his
pocket with both hands. In other words, it's pretty much like any
other major city. But the charm of Beijing will reveal itself
quickly as soon as you move away from the major tourist areas. It's
worth the effort.
---
My stock recommendation has everything to do with the prosperity of
the Chinese economy, and especially with the emergence of its new
crop of millionaires. The company is
Melco Crown Entertainment (
MPEL
)
, a Hong Kong concern that operates gambling casinos and resorts in
Macau, a three and a half hour flight from Beijing and a half hour
from Shanghai.
Macau, which is one of two special administrative zones in China,
has a special privilege: it's the only place where gambling is
legal in the whole country. (Gambling is hugely popular everywhere
in China, of course, but not on a Las Vegas scale.) Melco Crown has
one of only six operating concessions that allow for the
construction of casinos in Macau, and it has made the most of it.
The company operates City of Dreams, a $2.1 billion
work-in-progress that integrates splashy shows, shopping and a
resort experience with its huge number of gambling tables and
slots. It also runs the Altira Macau, eight Mocha Clubs, the Taipa
Square Casino and the gambling concession for the Studio City
Project.
It took a long time--seven years of negative earnings from 2004
through 2010--and a lot of investment for Melco Crown to hit its
stride. But the last two quarters have featured earnings growth of
600% and 567% on revenue growth of 45% and 30%, respectively.
Chinese millionaires aren't shy about showing their wealth, and
they will snake their Maseratis and Ferraris through the predatory
traffic of Shanghai in good style. And when they gamble, they like
to make a splash, which is exactly what Melco Crown has designed
its casinos to do.
Macau is just a 40-mile ferry ride from Hong Kong, and the area's
casinos do heavy business from day-trippers. Melco Crown caters to
these retail gamblers as well as the high rollers.
MPEL made a huge run from the middle of 2010 to the middle of 2011.
After a four-month shakeout, the stock began to pick up steam in
December 2011, and it has recently challenged its highs from last
year. The company will report earnings before the market opens on
May 9 (Wednesday) and investors are clearly expecting good news. I
think Melco Crown Entertainment is a great bet on the continuing
strengthening of the Chinese economy, and its citizens' taste for
games of chance.
Sincerely,
Paul Goodwin
Editor of
Cabot China & Emerging Markets Report