Mr. White: I think one thing is the government is trying to stimulate the domestic consumption of goods. So like you said, China has been an export-oriented economy, and China realized a couple of years ago that they really need to focus on developing the domestic market. So there has been a push even before the downturn a couple of years ago to start to de-emphasize industries that pollute the environment and are of limited value-add that are primarily focused on exports. A good example would be the printed circuit board industry, where the government stopped giving out licenses a couple of years ago for lower-end production. As the downturn started, the government announced a major stimulus package last November, which was followed with another phase earlier this year, which are partially aimed at increasing domestic consumption and creating domestic technology companies. The subsidies for the purchase of electronics products in rural areas goes on for four years - subsidies for LCD TVs, notebooks, mobile phones, the list goes on. And if you look at the LCD TV area, the major beneficiaries of the subsidy programs are largely China-based vendors.
TWST: What is a good example of a company that has taken this message from the Chinese government and shifted its focus toward the domestic market or is in the process of doing so?
Mr. White: I think there're plenty of companies over there that primarily focus on the domestic market, including TCL - that still focuses primarily on the domestic market. Another example is Cogo that generates about 70% of sales from China. They focus on the consumer market, the telecom equipment market and more recently the industrial market. So in the consumer market, they've seen some benefits from the subsidy programs. In terms of the industrial market that is very much subsidy driven, industrial is a big piece of the stimulus package.
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