Claire Cui says that careful investment in Chinese companies is good for investors--and good for China.

Photographed by Michele A. H. Smith

Claire Cui has a quintessentially 21st-century business card. Under business address, it lists two locations: one in Los Angeles and one in Hong Kong. Cui is not just bi-coastal; she's bi-continental.

Cui, who estimates that she spends about 40 percent of her time in Asia, serves as an Investment Analyst at Capital International Inc. Travel time is inevitable for someone whose job it is to analyze Chinese public companies for investors in Capital International's Emerging Market Growth Fund.

These days it would be easy to get access to financial numbers without leaving Los Angeles, but Cui says that by traveling to China she gains insight she would never get through reports. "Investment is a people business. The way you look at a company's numbers depends a great deal on the information you pick up by sitting across from people and talking to them."

Cui talks to a company's management to gain understanding of its status financially and strategically, but that is just the start. "I visit a company's factories and sales offices to get a feel for what and how it is really doing. I also talk to its customers to understand how they feel about dealing with this company. A company's bankers have better access to the 'real' numbers, so their insights are especially valuable."

Understanding China's current political outlook--including trends in the country's unemployment, inflation and living standard--is also important to ascertaining a company's long-range outlook. Cui says that, for this reason, access to government officials also is important. "If I want to understand the financial outlook of a bank, for example, I must speak to government officials who are in charge of banking. I want to know how they treat foreign capital and how they view the current interest rate environment. These have a tremendous impact on the future of the company."

All of this would be true whether Cui's job was to analyze U.S. companies or Chinese companies. But there are also challenges that are unique to analyzing and investing in Chinese companies. For example, many Chinese public companies have a rather tricky organizational structure. "A state-owned enterprise probably would not be able to go to the market and raise money because of low profitability and efficiency. So, often, a state-owned enterprise will create a separate subsidiary and package its good assets and efficient plants with the subsidiary to attract capital. There are inevitably strong ties between the parent and the subsidiary, but they try to have independent systems."

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