Now that China's doing two different and separate things, it might be time to have a look at stocks there. "Might," of course, for there is such a thing as a risk appetite and so on. Widows and orphans should still be in solid dividend paying stocks and all that. For the rest of us who cast our bread upon the investment seas perhaps Chinese stocks are worth looking at, now that lockdowns seem to be passing.

There is also the point that regulation of the online economy seems to be changing. So, as we look at Chinese stocks why not 36Kr Holdings (NASDAQ: KRKR)? Their basic story is providing content and business services within the Chinese economy. This is something where the foreign companies really cannot compete - both for social and language reasons and also for the nation focused nature of the Chinese internet. 

We do know that content provision can be highly profitable, the question of course is whether this specific instance of doing so is. At which point we can look at first quarter results just out. Revenues are up by 14% or so. Well that's nice but not exactly startling. It's also true that the increase in gross profit doesn't hugely excite, at 10%. But then comes the much more important point, that net income was $5.1 million as against a slightly larger loss in the same period a year back.

The point here being that whatever the business line there is always that necessity to make a profit at some point. Yes, it's possible to claim that it'll happen at some future date, but actual cash, at some point that's the whole point of having a business in the first place. It's also true that we've any number of offers out there who say that if they could just grow revenue a little more then they'd grow into their cost base. But actually making a profit is proof that you have grown into your cost base. Those fixed costs of being in business are now covered, marginal revenue from now on is at least in part gravy - the gravy we're all in business for in the first place. 

It's also possible to look at the basic motivation of the business. Sure, online content and all that. But here it's concentrated on that new economy itself. Which brings to mind the old gold rush point. Sure, some prospectors made money finding gold but not many of them and the vast majority lost everything,. The people who reliably made money were those selling the shovels to dig for gold with. 

The point here being that yes, there will be some very big winners from the New Economy. But servicing the New Economy is akin to the selling of the shovels, a more reliable pathway even if not one with such a wide variance in possible outcomes.

Lockdowns have changed at least, if not largely gone in the Chinese economy. So, business activity is rising again. Then there're the varied changes in policy that seem to be happening. Several games licences seem to have been issued in the past week for example. This is not a business that 36Kr is in but it is an indication of a change in the regulatory background.

The point of this not being quite that KRKR's activities become different. Rather, their reporting - articles, followers and so on - are about that New Economy online. So, a step change in the regulation of that New Economy leads to a new business opportunity for the company reporting upon it to those insiders and would be insiders of that new economy. Not to make a direct comparison in any way at all but Crunchbase benefits when VC activity in investing increases. So, 36Kr could be thought to at least potentially from a more vibrant China based business scene.

Perhaps more to the point. 36Kr's revenue stream is significantly affected by advertising. So, if we've an expanding new economy then ad rates, interest in advertising to that base, increases. Think on it for a moment, if we've a growing market and a platform that market already reads then we've network effects working in two ways. Those who would join that business sector will be reading the media, the advertisers will be desiring to advertise on it. We've got at least the potential for a virtuous circle here, network effects.  

We can also have a look at the nitty gritty of the numbers if we wish, from a company release: "36Kr  posted double-digit revenue growth in the first quarter and booked its highest quarterly profit even amid pandemic-induced challenges and the slowdown of China’s economy. And it expects continued growth after a successful monetization of enterprise value-added services thanks to a slew of big international clients.

In the first quarter, 36Kr’s main online advertising segment grew 13.1% from a year ago to RMB37.6 million ($5.9 million), attributed to innovative marketing solutions. The number of ad customers and the average revenue per customer both increased. Overall, 36Kr’s revenue jumped 13.9% year-over-year in Q1 to RMB49.6 million ($7.8 million) despite tough macroeconomic conditions.

Q1 was 36Kr’s second consecutive profitability quarter, with net income reaching RMB32.6 million ($5.1 million) in contrast to a loss of RMB40.5 million in the same period of 2021. Per-share earnings were RMB0.802 ($0.126). As of March 2022, 36Kr had cash, cash equivalents and short-term investments of RMB171.1 million ($27 million)."

Now, of course this leaves a certain series of questions about management's ability to execute and so on. Or even, well, are we sure that the Chinese new economy is going to run that course? My opinion - please note, opinion - on this is that underlying market structures are important. What works in one marketplace works in another. Selling information - OK, offering ad paid for content to - people in verticals works. We've seen this again and again in our own economies. The base model, yes, I can see it working elsewhere. As, well, as many of the other Chinese internet companies seem to have borrowed basic business models from corporations which have worked elsewhere. 

Do I think this is about to be a runaway success that entire pension funds should be dumped into? No, certainly not. But do I think there's something that should be looked at much more closely here? Yes, I do. For those who are interested in China risk then a profitable online information company does indeed look interesting. Of course, as a journalist I would say that too - but really, selling information to people, even if the payment is coming from ad revenues, has proven profitable again and again over the years.