David Fuller and Eoin Treacy's Comment of the Day
Category - China

    China to Close Loophole Used by Tech Firms for Foreign IPOs

    Companies currently listed in the U.S. and Hong Kong that use VIEs would need to make adjustments so their ownership structures are more transparent in regulatory reviews, especially in sectors off limits for foreign investment, the people said. It’s unclear if that would mean a revamp of shareholders or, more drastically, a delisting of the most sensitive firms -- moves that could revive fears of a decoupling between China and the U.S. in areas like technology. Details of the proposed rules are still being discussed and could change.

    The overhaul would represent one of Beijing’s biggest steps to crack down on overseas listings following the New York IPO of ride-hailing giant Didi Global Inc., which proceeded despite regulatory concerns. Authorities have since moved swiftly to halt the flood of firms seeking to go public in the U.S., shuttering a path that’s generated billions of dollars for technology firms and their Wall Street backers.

    It’s all part of a yearlong campaign to curb the breakneck growth of China’s internet sector and what Beijing has termed a “reckless” expansion of private capital. Banning VIEs from foreign listings would close a gap that’s been used for two decades by technology giants from Alibaba Group Holding Ltd. To Tencent Holdings Ltd. to sidestep restrictions on foreign investment and list offshore. It potentially thwarts the ambitions of firms like ByteDance Ltd. contemplating going public outside the mainland.
     

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    The Nazi Inspiring China's Communists

    This article from The Atlantic may be of interest to subscribers. Here is a section:

    Jiang is also widely credited with authoring the 2014 Chinese-government white paper that gives Beijing “comprehensive jurisdiction” over Hong Kong. In a nod to Schmitt, the paper claims that the preservation of sovereignty—of “one country”—must take precedence over civil liberties—of “two systems.” Using Schmitt’s rationale, he raises the stakes of inaction in Hong Kong insurmountably high: No longer a liberal transgression, the security law becomes an existential

    Chen and Jiang are “the most concrete expression thus far of [China’s] post-1990s turn to Schmittian ideas,” Ryan Mitchell, a law professor at the Chinese University of Hong Kong, wrote in a paper in July. They are the vanguard of the statist movement, which supplies the rationale for the authoritarian impulses of China’s leaders. And though it is unclear precisely how powerful they are in the upper echelons of the party, these statists share the same outlook as their paramount leader. “Xi Jinping’s big project is on reinventing and revitalizing state capacity,” Jude Blanchette, China chair at the Center for Strategic and International Studies, told me. “He is a statist.”

    Why has a Nazi thinker garnered such a lively reception in China? To some degree, it is a matter of convenience. “Schmitt serves certain purposes that Marxism should have done, but can no longer do,” Haig Patapan, a politics professor at Griffith University in Australia who has written on Schmitt’s reception in China, told me. Schmitt gives pro-Beijing scholars an opportunity to anchor the party’s legitimacy on more primal forces—nationalism and external enemies—rather than the timeworn notion of class struggle.

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    Jamie Dimon Jokes, but Will China's Leadership Laugh?

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “The Communist Party is celebrating its 100th year — so is JPMorgan,” the bank’s chief executive officer, Jamie Dimon, said Tuesday at a panel discussion at the Boston College Chief Executives Club. “I’d make a bet we last longer,” reported Bloomberg News. 

    And

    In China, business dealings often come down to narrative. One day, a foreign bank is welcome, and its presence is seen as helping China improve its financial industry. The next day, the same enterprise could be painted as a predatory vulture. Words matter, and harmless intent or humor can be misconstrued in translation. Jamie Dimon has every right to tell a joke, but it always helps to know your audience.

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    Prudent to file 'loss of state-owned assets' allegations despite public discontent against Lenovo continues

    This article from the Global Times by Hu Xijin may be of interest. Here is a section:

    However, Lenovo actually derailed from the route of trade, industry and technology. Instead of making real efforts to scientific and technological innovation after original accumulation, it gradually withdrew from the front line of national scientific and technological progress, and made fewer contributions to China's core competitiveness. Many people felt that this failed to live up to their expectations on Lenovo as a well-established enterprise.

    In particular, it has been eclipsed by tech companies such as Huawei that have suffered from US crackdown, and was not as innovative in patterns compared with emerging companies such as Xiaomi. But Liu and Yang, and their likes still enjoy a high salary of hundreds of millions of yuan in the partially state-owned enterprise. As a result, both the public image of the whole company and their own personal images have become fragile. In fact, doubts emerged a long time ago.

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    Alibaba Outlook Disappoints After China Slowdown Hurt Sales

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Revenue growth at a plethora of divisions including its Cainiao logistics arm and local on-demand services underperformed expectations, while bread-and-butter customer management revenue from platforms like Taobao and Tmall grew just 3% -- the slowest in at least five quarters.

    Competition is intensifying just as China grapples with the widest Covid-19 outbreak since the virus first emerged in Wuhan. Rivals like JD.com Inc. and Pinduoduo Inc. are stepping up investments to win over Alibaba’s users, just as a resurgence in coronavirus cases dents consumer spending. Gross domestic product expanded 4.9% in the September quarter, cooling from the 7.9% growth in the previous period, partly because of lockdown measures across many cities.

    “Looking ahead, we will continue to invest heavily into three growth engines of domestic consumption, globalization, cloud computing and data intelligence,” Zhang told analysts on the call.

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    Mobius Bets on '50-Year Rally' in Indian Stocks as China Slows

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “India is on a 50-year rally,” even if there are short bouts of bear markets, Mobius said in an interview on Bloomberg Television. “India is maybe where China used to be 10 years ago,” he said, adding the government policies of unifying rules across states will help the country in the long run.

    Mobius’ bullish view on India clashes with those of analysts at Morgan Stanley and Nomura Holdings Inc., who have downgraded the stock market after the benchmark S&P BSE Sensex Index more than doubled from a March 2020 low.

    Emerging-market equities have trailed behind their developed-nation peers this year, held back by losses in China as the government has roiled markets with a widespread regulatory crackdown.

    “People say emerging-markets look bad because China is dragging down the index, but they have to look at other areas such as India that are going up,” said Mobius…

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    China's Inflation Risks Build as Producers Pass on Costs

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The producer price index climbed 13.5% from a year earlier, the fastest pace in 26 years and above economists’ median forecast for a 12.3% gain, data from the National Bureau of Statistics showed Wednesday. The consumer price index rose 1.5%, the highest since September 2020 and exceeding the projected 1.4% gain.

    Producer prices in China have been rising rapidly in the past few months, first due to the global commodity price rally and then output curbs caused by a power crunch. Consumer inflation is also starting to pick up as weather-related supply problems push up food prices and manufacturers pass on higher costs to retailers. 

    The data “implies broad-based inflation pressure on both the production side and the consumer side,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong Ltd. “Inflationary pressure and the more hawkish stance of monetary policy in other major economies will likely limit China’s room to maneuver for monetary easing.”

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    Chinese Developers Repay Bonds Early as Contagion Spreads

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    As stress among Chinese developers mounts, some firms are telegraphing their ability to meet debt
    obligations.

    On Monday, Zhenro Properties Group Ltd. said it informed a bond trustee it will redeem its 5.95% dollar notes early in full on Nov. 16. Central China Real Estate Ltd. on Tuesday said it has remitted funds to a trustee for payment of its 6.75% dollar bonds, which are due Nov. 8.

    “Central China Real Estate becomes one of a string of developers publicly setting aside money to redeem offshore bonds in apparent attempts to set themselves apart from weaker firms,” said Daniel Fan, an analyst at Bloomberg Intelligence.

    Property companies need to do all they can to restore investor faith. Yields on Chinese junk dollar bonds -- dominated by real estate firms -- surged to more than 20% on Monday, the highest in at least a decade. Credit assessors are downgrading the industry’s companies at the fastest pace on record. At least four developers defaulted last month and others sought to delay near-term bond payments as contagion sparked by China Evergrande Group spreads.

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    China Urges Winter Food Stockpiling, Prompting Online Worry

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    China’s bracing for a cold snap this week, with temperatures in some regions forecast to fall by as much as 15 degrees Celsius. Vegetable prices typically rise when the temperature drops in winter and supply is unable to catch up with increasing demand before the Lunar New Year holiday.

    The Monday statement told local commerce departments to coordinate more to improve local and inter-provincial supply chains for vegetables and also to strengthen monitoring of the prices of key staples such as vegetables and meat. 

    Major agricultural distributors were encouraged to sign long-term contracts with producers, while provinces in both southern and northern China were told to improve their vegetable reserve systems and also release meat and vegetables from the reserves in a timely manner to replenish supplies. 

    The call to stock up on food comes less than two weeks after a different government department told companies not to hoard food. 

     

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