Over a period of time the world is wondering as to the justification that the Chinese planners have while investing in huge( rather wild shot ) infra investments . A similar set of questions do crop up when we see the mind boggling valuations that are placed on the newly start up e business ventures , particularly in distribution and marketing e businesses .
The questions and dis belief is based upon a strong belief in the existing set of the parametres of evaluating an investment decision and if you view these valuations and investment decisions from your existing set of norms and standards, you will never find them attractive and will find them crazy!
For instance, China views political and strategic advantages as a part of returns and thus places a long investment period to evaluate and justify its viability. The period that they seem to have is much much beyond the standard 10 to 15 years . They also view the jobs created in domestic market and its fall outs as well as boost in trade and commerce, political strong hold etc as a part of their returns. Than only the setting up of an entire city on a foregn land or building roads over the Himalayas can be justified. Their way of understanding and managing Macro Economics need to be studied more carefully in order to know our competitor.
As far as the new found crazy valuations of e retail businesses are concerned, the investors also know that such high valuations are not to be justified in a short run. They are also not naive to believe that there is a near certainty of someone offering them a better price in near future.
What they seem to be aiming at is a strong foothold over the market that these companies cater to, the criticality of the market that they cater to and the real estate investment that they need to make to be in the market place . The pre requisite for keeping such criterias for justifying the investment decisions is to have a very very long time frame for justifying the investment. It is clear that they too have a really a very long time horizon to evaluate their investments.
Who these investors really are, is a matter of guess and my guess will be as good or as bad as yours !!
