Since bottoming at the end of October, the MSCI Emerging Market Index (MXEA) and MSCI Asia Ex-Japan ...
Beijing Then and Now
05/11/2012 7:15 am EST
It’s amazing what years will do to a nation that’s growing as fast as China, observes Paul Goodwin of Cabot Wealth Advisory.
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.
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.
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.)
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.
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.
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.
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 reported better than expected earnings on May 9.
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.
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