EBay pledged to spend $100 million to beef up its presence in China this year, adding to its already formidable presence in the country. EBay bought out Chinese Web auction site EachNet.com Corp. two years ago for a total of US$180 million. The same year, Yahoo paid US$120 million for 3721 Network Software Co. Ltd., a Hong Kong company that operates the Chinese search engine 3721.com. And last year, Google Inc. bought a 2.6 percent stake in Baidu.com.
Interest in China's Internet sector is growing so fast that some venture capital firms are luring talented executives away from Internet companies like the ones they seek to invest in, which could hurt the industry. Ctrip.com International Ltd., which runs China's top online travel site, lost its co-founder and president, Neil Shen, to U.S. venture capital firm Sequoia Capital last week.
The loss hurt.
Investment firm Merrill Lynch advised its clients to stop buying Ctrip.com's stock, reducing its rating on the Nasdaq-listed company to neutral, partly because of the executive's departure.
"We view this negatively as Neil was an integral part of the team that built Ctrip," said Merrill Lynch analyst David Cui in a research report Friday.
Some regulatory changes in China have also been a problem. Although a record amount of private investment money stands ready to be deployed in Asia, actual investment to China has slowed because changes in certain rules mean foreign venture capital firms can't create the business structures they most prefer for their investments.
Still, some analysts argue the regulations could be a blessing in disguise. By forcing the venture capital companies to move slowly, they might avoid some of the reckless investments that characterized the U.S. dot-com bubble.
A splash of new investment money could also end up pitting existing Chinese Internet firms against upstarts, a boon to consumers who would benefit from competition, but harmful to companies that are forced to cut prices in order to compete.
"Too much venture capital chasing too few good opportunities is a potential problem in China that could hurt established players in the Internet segment," said Bean.
But China's dot-com boomlet is just getting started. There's still plenty of time for history to repeat itself -- and to doom those who have failed to learn its lessons.
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