In-Depth

by Malcolm Riddell

China's Tech Crackdown
3

'Stock Market: China Doesn’t Care How Much Money Investors Lose'

Bloomberg

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Shuli Ren | Bloomberg
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August 1, 2021
'Stock Market: China Doesn’t Care How Much Money Investors Lose'
'Stock Market: China Doesn’t Care How Much Money Investors Lose'
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Shuli Ren | Bloomberg

China's Tech Crackdown

3

BIG IDEA | ‘Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital? The short answer is, no, the government doesn’t care.
'But it’s not that simple. Beijing is pursuing other goals.’

‘Whether you’re a bond or stock investor, chances are you’ve been burned by the Chinese government this year.’

‘Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital?

  • ‘The short answer is, no, the government doesn’t care.’

‘But it’s not that simple. Beijing is pursuing other goals:’

‘And Beijing is suspicious of companies that are skilled at raising capital overseas—beyond its watchful eye.’

  • ‘There’s one practice it’s especially concerned about: a variable interest entity (VIE) corporate structure commonly deployed by the hottest unicorns.’
  • ‘Often incorporated in the Cayman Islands, these startups raise capital and list their shares offshore.’
  • ‘The money raised, in turn, gets pumped into China for business developments.’

‘Sometimes, China might feel it’s being hijacked by hot foreign money.’

  • ‘For example, Beijing wanted to scale down investment in for-profit education as early as 2018, but venture capital kept pouring in.’
  • ‘Now the lucrative bet has been called to a halt.’

‘Or consider geopolitical risks. Because of the VIE structure, in theory, DiDi, which is incorporated in the Cayman Islands, didn’t need Beijing’s approval to list in New York.’

  • ‘But China’s cybersecurity office was concerned enough about DiDi’s data security—such as possible exposures to sensitive government locations—that it suggested the company postpone its IPO.’
  • ‘DiDi ignored the warning, and we all know how it’s turning out.’

‘Beijing has made great efforts to instill discipline into its marketplace, and it wants to see more hot unicorns list and raise money on the mainland.’

  • ‘Yet they continue favoring New York over Shenzhen, Hong Kong over Shanghai.’

‘So it’s not that China is antagonistic toward foreign money.’

  • ‘It just wants to admonish those who seek loopholes abroad.’

‘And this is the new message: If you’re going to invest in China, you’ll have to do it through the capital markets it’s developing.’

  • ‘That won’t only strengthen the domestic economy, it will also allow Beijing to make sure the capital goes to industries it wants to develop and stays away from areas it deems a threat to the common good.’
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In-Depth

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AUKUS: A New World Order?

‍In case you passed over the news of AUKUS, the new strategic alliance among the U.S, the U.K., and Australia, here a few headlines to encourage a deeper look.
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Xi Jinping: Today, video games. Tomorrow, well ... just be good.

Today's issue is a heads up on what may be Xi Jinping's efforts to reshape Chinese society.
9/7/2021

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The Taliban: 'China's Perfect Partner'?

Breaking through the blow-by-blow reporting that started when the Taliban began its sweep to victory are the geopolitical analyses of who gains and who loses in Afghanistan.
8/28/2021

CHINADebate

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China's Tech Crackdown
0

China's Tech Crackdown: 'Nobody Saw It Coming.' — Huh?

‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders, and regulatory changes rip apart the old playbook,’ writes Reuters’ Tom Westbrook.
8/1/2021

Bloomberg

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Andrew Browne | Bloomberg
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China's Tech Crackdown
2

'Why China Is Cracking Down on Its Technology Giants'

‘Why, you may ask, is China crushing some of its most innovative unicorns? We’re in a new era led by President Xi Jinping, and politics are in command.’
8/1/2021

Bloomberg

CHINADebate

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Shuli Ren | Bloomberg
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China's Tech Crackdown
4

'Xi's Four Pillars of Regulation'

‘Broadly, Beijing is concerned about four pillars of stability: banking, anti-trust regulation, data security and social equality. All of Beijing’s major interventions reflect these concerns.’
8/1/2021

Bloomberg

CHINADebate

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Shuli Ren | Bloomberg
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&
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China's Tech Crackdown
3

'Stock Market: China Doesn’t Care How Much Money Investors Lose'

‘Does Beijing not care how much money foreign investors have lost? Does the government really want to close China Inc.’s access to the deep pool of global capital? The short answer is, no, the government doesn’t care.
8/1/2021

Reuters

CHINADebate

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Tom Westbrook | Reuters
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China's Tech Crackdown
1

'The most significant philosophical shift since Deng'

‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders and regulatory changes rip apart the old playbook. According to some analysts, it is the most significant philosophical shift since former leader Deng Xiaoping set development as the ultimate priority 40 years ago.’
8/1/2021

CHINADebate

CHINADebate

Malcolm Riddell
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CHINADebate

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Didi: Xi Surprises Us Again

Beijing shocked the financial world when it pulled the rug out from under Didi days after its IPO on the New York Stock Exchange and also announced new regulations reigning in overseas IPOs and Chinese companies already listed.
7/8/2021

CHINADebate

CHINADebate

Malcolm Riddell
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What the West Gets Wrong About China
0

‘Why do business and political leaders in the West persist in getting China so wrong?’

From that I suggested that to invest successfully in China, you have to understand – and be aware of - what those differences are.
6/20/2021

Harvard Business Review

CHINADebate

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Rana Mitter | Oxford
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What the West Gets Wrong About China
1

Part 1 | ‘Why do business and political leaders in the West persist in getting China so wrong?’

‘Why do business and political leaders in the West persist in getting China so wrong?’
6/20/2021

Harvard Business Review

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Rana Mitter | Oxford
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What the West Gets Wrong About China
2

Part 2 | ‘Myth 1: Economics and Democracy Are Two Sides of the Same Coin'

‘The truth, then, is that China is not an authoritarian state seeking to become more liberal but an authoritarian state seeking to become more successful—politically as well as economically.’
6/20/2021

Harvard Business Review

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Rana Mitter | Oxford
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What the West Gets Wrong About China
3

Part 3 | ‘Myth 2: Authoritarian Political Systems Can’t Be Legitimate’

‘A Marxist-Leninist system is concerned not only with economic outcomes but also with gaining and maintaining control over the system itself.’ ‘That has huge implications for people seeking to do business in China.’
6/20/2021

Harvard Business Review

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Rana Mitter | Oxford
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What the West Gets Wrong About China
4

Part 4 | ‘Myth 3: The Chinese Live, Work, and Invest Like Westerners’

‘For much of its turbulent modern history, China has been under threat from foreign powers, both within Asia (notably Japan) and outside it (the UK and France in the mid 19th century).’ ‘China’s rulers, therefore, see foreign engagement as a source less of opportunity than of threat, uncertainty, and even humiliation.’
6/20/2021

The New York Times

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Jack Nicas, Raymond Zhong, & Daisuke Wakabayashi | The New York Times
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Apple in China
1

‘Censorship, Surveillance and Profits: A Hard Bargain for Apple in China’

‘Apple built the world’s most valuable business on top of China. Now it has to answer to the Chinese government.’
5/20/2021

Wall Street Journal

CHINADebate

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Apple in China
5

'Tim Cook and Apple Bet Everything on China.'

‘For Apple, a clean break with China is impossible.’
5/20/2021

The New York Times

CHINADebate

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Jack Nicas, Raymond Zhong, & Daisuke Wakabayashi | The New York Times
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Apple in China
2

'Apple in China: No Plan B'

“This business model only really fits and works in China. But then you’re married to China.” ‘The Chinese government was starting to pass laws that gave the country greater leverage over Apple, and Mr. Xi would soon start seeking concessions. Apple had no Plan B.’
5/20/2021

The New York Times

CHINADebate

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Apple in China
3

'Apple Reaches $2 Trillion'

“This business model only really fits and works in China. But then you’re married to China.” ‘The Chinese government was starting to pass laws that gave the country greater leverage over Apple, and Mr. Xi would soon start seeking concessions. Apple had no Plan B.’
5/20/2021