It is not an exaggeration to say that all roads of growth lead to or through China. The obvious question for some of today’s most popular growth stocks is, “Out of Apple, Google, and Facebook, which company will do better in China?”
The Facebook (FB) IPO is upon us Friday, and the last Apple (AAPL) earnings conference call was remarkable in its description of astounding growth in China. Google (GOOG) is the main competitor of Apple in mobile operating systems, and commentary on valuation of Google vs. Facebook has become quite popular.
The biggest mistake I have seen gurus make in analyzing such a question is not fully comprehending that China is very different from America or Europe. Let us start out by developing a better understanding of China.
Communist Capitalists
In spite of all the progress China has made, the economy is still tightly controlled by an authoritarian communist regime. The first priority of the regime is its own survival. This is the paramount consideration any time China deals with a large enterprise such as Apple, Google, or Facebook.
The inherent nature of Google and Facebook is to empower the masses, which runs counter to the survival instincts of the regime. On the other hand, Apple does not threaten the regime.
On this count Apple wins.
Memory of Back Stabbing is Still Fresh
Google got an early foothold in China by agreeing to Chinese censorship of Google search results. Later on Google’s founders had second thoughts about Chinese censorship. Unnerved by Chinese hacking of Google’s computers, Google criticized Chinese censorship….Read more at Forbes