Thursday, May 24, 2007

Chengdu - Day 4/5

The last two days were mostly spent at PMI's office. In order to help with their business plan, I needed to understand the business better so we spent some time with the accountant. From what I saw, the accounting rules are not that different since China follows International GAAP; the only difference is that the government is much more intrusive. It was difficult to communicate since I don't know any accounting/finance terms in Mandarin (I don't even know how to say finance) and English competency is pretty low in Chendgu.

One interesting thing I found out is that companies cannot issue their own invoices. In order to combat corruption, the government prints numbered invoices that companies must use. This way, you can't falsify expenses since all reported expenses requires a corresponding official invoice. This makes it difficult to account for all the "red envelopes" that's part of Chinese business culture. It also requires an army of people to track all this paper but there are a lot of people in China. :)

I also got a tour of the land PMI is buying to build their new factory. It's a little piece of land in the middle of a high tech industrial park. There's even got a nice stream at the back of the property. The area behind the stream is taken up by a Motorola software design center and there is a large Intel packaging plant down the street.

Wednesday evening I met up with my 3rd uncle on my mom's side and his niece. He moved to Chengdu earlier this month from Canada and is planning to stay until November. My parents are coming to Chengdu in October so they will get to meet him. I haven't seen him since I left Canada in 1985 so it's funny that I finally meet him 22 years later in China. We went to dinner at a local restaurant. The food was really good and cheap.

Hmm, I'm having problems uploading photos to Blogspot. Maybe I'm blocked by the Great Firewall of China.

Thursday was pretty uneventful. We met with a local VC where Leon pitched PMI again. I didn't say anything during the meeting but learned how company valuation works in China. Evidently, the Registered Capital (similar to Paid-in Capital) amount is used where we use discount future cash flow to value a company in the US. They found it hard to believe that a company's value is not tied to the current balance sheet.

For lunch we had some noodles at a restaurant across the street from the VC. Each bowl of noodle was only RMB$4-5 but the portion size here is a lot smaller though. For dinner, we met up with a finance manager from one of PMI's vendors. He is from Taiwan but has a MBA from a small school in New Jersey. We wanted to pick his brain about investment and company structure issues in China. The restaurant specialized in local Szechuan cuisine. For RMB$88 per person, we got to sample 20+ dishes. It's also the 4th time I've had watermelon juice with a meal; it seems to be quite popular in Chengdu.

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