In the Financial/Economic News

[Randy W]

from the SCMP

 

China’s economy shrank by 6.8 per cent in the first quarter

• China’s economy shrank by 6.8 per cent in the first quarter of 2020 after the coronavirus shut down large swathes of the country
• Industrial production, retail sales and fixed asset investment all shrank again in March, showing challenge in restarting economy

 

 

From the NY Times - "The coronavirus ended nearly half a century of continuous growth, official figures show, underscoring how momentous the task of reviving the global economy will be."

[Randy W]

Then there's Luckin Coffee - from the WSJ

 

Luckin Coffee Under Investigation by China’s Top Commerce Regulator

More than a dozen officers from the country’s State Administration for Market Regulation descended on Luckin Coffee’s headquarters in Xiamen on Sunday, the person said, adding that they demanded access to the company’s accounts and other records. The company is complying with the requests for information, the person said.

 

Luckin, which went public on the Nasdaq Stock Market in May 2019, had touted itself as a major rival to Starbucks Corp. in China and raised more than $1.5 billion from investors in the past year, taking advantage of a rising share price that was buoyed in part by its inflated quarterly results.

 

The company disclosed on April 2 that as much as 2.2 billion yuan ($310 million) in sales transactions was fabricated by some employees, and that an internal investigation is being conducted. Luckin’s American depositary shares have been suspended from trading since April 7.

 

Edited April 30, 2020 by Randy W (see edit history)

[Randy W]

from MarketWatch

 

Senate passes bill that could delist Chinese companies from U.S. stock exchanges

 

The Holding Foreign Companies Accountable Act would force Chinese companies to adhere to U.S. securities law

 

The bill would require Chinese companies to establish they are not owned or controlled by a foreign government. Furthermore, they would be required to submit to an audit that can be reviewed by the Public Company Accounting Oversight Board, the nonprofit body that oversees audits of all U.S. companies that seek to raise money in public markets.

 

“Stated more directly, unlike companies from the U.S. and Europe and everywhere else in the world, Chinese companies that list on the U.S. stock exchanges are exempt from meaningful financial oversight,” the lawyer said.

 

. . .

 

The U.S.-China Economic and Security Review Commission compiled a list in 2019 of 165 Chinese companies that are listed on U.S. stock exchanges, including Alibaba Group Holding Ltd. (BABA) , Baidu Inc. (BIDU) and JD.com Inc. (JD) , all of which could be at risk of being delisted if this legislation were to pass.

 

 

[Randy W]

from the SCMP

 

China’s world-beating stock bull run unleashed by economic recovery and liquidity sparks fears of another 2015 meltdown

• The value of Asia’s largest stock market increased by US$1 trillion – an amount larger than the Dutch economy – in the past three weeks
• The frenzy reminds some observers of the 2015 run-up – also fuelled by liquidity and valuation expansions – which ended in a US$5 trillion wipeout

When Yi Huiman took over the helm of China’s securities watchdog 18 months ago, pundits in the nation with 166 million stock trading accounts saw the auspiciousness of his name and cheered. “Easy” and “bountiful” are the propitious promises symbolised by the name – in Chinese characters -of the former banker, who spent 34 years working his way to the very top of China’s most valuable lender before being hand-picked to oversee the stock market. Yi, a trained statistician, did not disappoint.

 

. . .

 

Explanations for the spectacular rally in China’s stock market – the major indices came close to, but never did fall into bear territory throughout this year’s coronavirus pandemic – run the gamut from the arcane and conspiratorial to the geopolitical and macroeconomic. One thing that analysts, fund managers, brokers and traders can agree on is that they have not seen so much wealth being created so quickly for a very long time.

 

 

 

[Randy W]

I'm not real sure that any of us will notice a difference, unless you have a Chinese relative who applies for a Chinese AmEx card through one of the mentioned banks, a card which might only be usable outside of China.

 

from the SCMP

 

China’s new AmEx cards promote international use of the yuan

• Beijing’s decision to let American Express join national clearing network will boost the yuan’s circulation and its role in global finance, analysts say
• The move has the added benefit of reducing China’s reliance on the US dollar payments system as bilateral relations between Washington and Beijing deteriorate

American Express’ entry into China’s US$27 trillion payment market may help increase the use of the yuan across borders amid worsening US-China tensions, according to analysts.

 

Since last week, Chinese commercial lenders Minsheng Bank, Guangfa Bank, Ping An, Shanghai Pudong Development Bank and China Merchants Bank have launched American Express cards whose bills can be paid in yuan both inside and outside China. Previously, offshore card transactions were allowed to be settled only in foreign currencies.

 

The joint venture between American Express and LianLian DigiTech, called Express (Hangzhou) Technology Services, obtained approval in June from China’s central bank for a network clearing license, making American Express the first foreign company allowed to settle yuan-denominated credit card transactions both abroad and on the mainland.

 

The clearing of card transactions refers to the settlement of transactions and the transfer of funds from one bank to another, and by a bank to a merchant that accepts the card when someone uses it to make purchases.

 

 

 

[Randy W]

from Fortune Magazine - it's not clear that any American broker would hold any shares on the Hong Kong exchange for you, but you can always keep the OTC shares. I think the BNY Mellon would be able to broker the shares for you.

The NYSE is set to delist 3 Chinese companies—but U.S. investors can still own shares

Quote

 

In three separate filings with market operator Hong Kong Exchanges and Clearing (HKEX) on Monday, the three telecom companies said that investors can deposit their ADS holdings with the Bank of New York Mellon and receive Hong Kong shares in return. Each company also said they had yet to receive confirmation about their imminent delisting from the NYSE.

 . . .

Trump’s executive order was the latest maneuver from Washington against Chinese companies listed on U.S. exchanges. Legislators introduced multiple bills in 2020 calling for the Securities and Exchange Commission to delist foreign companies that fail to disclose proper auditing documents. Chinese companies often fail to comply with U.S. audit standards because Beijing blocks the release of certain information on national security grounds.

Following the executive order, the Treasury Department released a list of 35 Chinese companies that it calls “Communist Chinese Military Companies.” Not all of the companies are listed in the U.S., however; some are not listed at all. Smartphone and telecom equipment maker Huawei Technologies, for example, is on the list but is a privately-held company. (Huawei says it is employee-owned.)

 

Following the executive order, the Treasury Department released a list of 35 Chinese companies that it calls “Communist Chinese Military Companies.”

https://www.treasury.gov/ofac/downloads/ccmc/ns-ccmc_list.pdf

link to https://www.treasury.gov/ofac/downloads/ccmc/ns-ccmc_list.pdf

Edited January 4, 2021 by Randy W (see edit history)

[Randy W]

from the WSJ

U.S. Weighs Adding Alibaba, Tencent to China Stock Ban
Federal officials have discussed expanding a blacklist of companies off limits to U.S. investments over concerns about ties to Chinese authorities.

Tencent and Alibaba are China’s two most valuable publicly listed companies, with a combined market capitalization of over $1.3 trillion and scores of American mutual funds and other investors holding their shares. Alibaba’s New York-listed American depositary receipts fell more than 5% on Wednesday, while Tencent ADRs tumbled by about 4% in the U.S. over-the-counter market.

[Randy W]

from the SCMP on Facebook

https://www.facebook.com/355665009819/videos/814177299165438/

Quote

 

SCMP Explains: Hong Kong’s Tracker Fund

The biggest and most popular index fund on the Hong Kong Stock Exchange could be in trouble.

[Randy W]

from the SCMP

China takes victory lap over economic recovery, but critics find cracks in success story

• The Chinese economy officially grew by 2.3 per cent in 2020, crowning a remarkable recovery from extreme coronavirus lockdown conditions in the early part of the year
• Data seen to legitimise authoritarianism of Xi Jinping and Communist Party, but critics point to unsustainable nature of China’s dramatic rebound

Quote

 

China’s economy was brought to its knees: factories stopped producing, restaurants stopped serving, internal borders were shut tight. A 6.8 per cent contraction in the first quarter was seen as a sign of worse things ahead by many analysts, some of whom expected a near-total collapse of the Chinese economy.

But that was as bad as it would get for China in 2020. On Monday, 361 days after its initial lockdowns, the Chinese government announced that the turnaround was complete. The national economy is now growing more quickly than it was before the pandemic, expanding by 6.5 per cent in the final quarter of 2020, compared with 6.0 per cent in the last three months of 2019.

While 2.3 per cent economic growth for the whole of 2020 is the lowest since 1976 – the year Mao Zedong died and when China was reeling from the devastation of the Cultural Revolution – it marks a faster gross domestic product (GDP) growth rate than most anyone predicted early in the year.

And it comes as many other nations remain in the throes of the pandemic: the global death toll ticked past the 2 million mark over the weekend, while large swathes of the West continue to veer in and out of lockdowns.
At a press conference on Monday, Chinese officials were triumphant. Ning Jizhe, the head of China’s National Bureau of Statistics (NBS), said the economic recovery “will go down in history”.

 

 

[Randy W]

from China Pictorial on Facebook

https://www.facebook.com/553929144732479/posts/3460918430700188/

China's stronger-than-expected economic rebound and continuous structural improvements last year have signaled that the country's pursuit of high-quality growth is set to gain more momentum in 2021, officials and experts said on Monday.

The world's second-largest economy grew by 2.3 percent in 2020, and it is likely to be the only major economy to have achieved annual growth, the National Bureau of Statistics said on Monday.
The country's annual GDP came in at 101.6 trillion yuan ($15.7 trillion) last year, surpassing 100 trillion yuan for the first time and indicating that its overall national strength has reached a new level, the bureau said.

[Randy W]

 

 

from Shenzhen Pages on Facebook

https://www.facebook.com/305447029839943/posts/1269060643478572/

Quote

#Guangdong has ranked 13th in the world by #GDP if taken as an economic body, the Securities Times said. With a breakthrough over the 11 trillion RMB threshold, Guangdong has retained its place as the top province with the highest GDP in #China for 32 years in a row.

[Randy W]

from the Sixth Tone (dated Nov. 12. 2020)

Putting Ant Under the Microscope

Regulators may have called off Ant Group’s record IPO at the last minute, but there’s more at play here than just a simple battle between private entrepreneurs and the state.

On Nov. 3, shortly after a closed-door meeting between regulators and executives from Ant Group, the Shanghai Stock Exchange announced the company’s record-breaking initial public offering, originally scheduled for later in the week, was being put on ice indefinitely.

Ant, whose Alipay digital payments service has made it the most valuable financial technology company in the world, has long operated in the gray areas of China’s otherwise tightly controlled financial sector. This has been a source of frustration for banks who feel unable to compete with their less regulated high-tech peer, officials worried about spiraling consumer debt, and for Ant itself. One week before the IPO freeze, Ant’s controlling shareholder, outspoken Alibaba founder Jack Ma, delivered an impassioned speech at a high-profile economic forum criticizing China’s financial regulations for stifling innovation. “We shouldn’t regulate an airport as if it is a train station,” Ma said. “We shouldn’t regulate the future with yesterday’s means.”

[Randy W]

from the WSJ

China Blocked Jack Ma’s Ant IPO After Investigation Revealed Likely Beneficiaries

• Well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi, were behind layers of opaque investment vehicles. The information added to concerns about financial risk and anger at Ma’s outspoken criticism.

Quote

 

In the weeks before the financial-technology giant was scheduled to go public, a previously unreported central-government investigation found that Ant’s IPO prospectus obscured the complexity of the firm’s ownership, according to the officials and government advisers, who had knowledge of the probe. Behind layers of opaque investment vehicles that own stakes in the firm are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle.

Those individuals, along with Mr. Ma and the company’s top managers, stood to pocket billions of dollars from a listing that would have valued the company at more than $300 billion.

 . . .

An Ant spokesman said in a statement that the details of Ant’s shareholding structure were fully disclosed in the group’s prospectus and in its public business registration records.

 . . .

It has made loans to close to half a billion people, operates the country’s largest money-market fund and sells scores of other financial products. But it hasn’t had to follow the tough regulations and capital requirements that commercial banks are subject to. It makes profits from the transactions, while state-owned banks supply the majority of the funding and take on most of the risk.

“On one hand, you got a bunch of individuals potentially amassing large amounts of wealth,” one of the people familiar with the probe into the shareholders said. “Then on the other hand, much of the risk has been transferred to the state side.”

 

 

[Randy W]

from Bloomberg via Yahoo News - Wed, April 14, 2021, 3:28 AM

Jack Ma’s Double-Whammy Marks End of China Tech’s Golden Age

Quote

 

The country’s government imprinted its authority indelibly on the country’s technology industry in the span of a few days. In landmark announcements, it slapped a record $2.8 billion fine on Alibaba Group Holding Ltd. for abusing its market dominance, then ordered an overhaul of Ant Group Co. On Tuesday, regulators summoned 34 of the country’s largest companies from Tencent Holdings Ltd. to TikTok owner ByteDance Ltd., warning them “the red line of laws cannot be touched.”

The unspoken message to Ma and his cohorts was the decade of unfettered expansion that created challengers to Facebook Inc. and Google was at an end. Gone are the days when giants like Alibaba, Ant or Tencent could steamroll incumbents in adjacent businesses with their superior financial might and data hoards.

 . . .

The most amorphous yet dire threat lies in the simple principle implicit in regulators’ pronouncements over the past few days: that Beijing will brook no monopolies that threaten its hold on power.

The central bank warned in draft rules released previously that any non-bank payment company with half of the market for online transactions — or two entities with a combined two-thirds share — could be subject to antitrust probes. If a monopoly is confirmed, the State Council or cabinet has powers to levy a plethora of penalties, including breaking up the entity.

That’s an entrepreneur’s ultimate nightmare.

“Everyone is on the regulators’ radar, and it really depends on each one’s reaction next,” Chanson & Co.’s Shen said. “It’s better to take the initiative to self-rectify, rather than having to go through restructuring ordered by the regulators, which may not have your best interests in mind.”

 

 

Edited April 16, 2021 by Randy W (see edit history)

[Randy W]

 . . . and in the insurance industry. Sounds like it's just an adjustment of how the money is pooled.

China Announces Insurance Overhaul, a Boon to Aging Population
The central government says companies should pay into large public health insurance pools managed by local authorities instead of into their workers’ personal insurance funds.

from the Sixth Tone

Quote

 

Working people in China currently have 2% of their yearly income deducted and added into their personal health insurance funds. Their employers, meanwhile, pay a higher percentage that varies from place to place — 9.5% in Shanghai, for example. Some of this percentage goes toward the employees’ personal funds, while the rest is added to a larger local health insurance pool overseen by local authorities.

However, under the new scheme, which is expected to take years to implement, all of the employer’s contribution will go toward the public fund, leaving only the 2% going into workers’ private funds.

 . . .

 Chen explained, “with so much money going into a large pool, there will be a new framework that amplifies protection and mitigates risk faced by certain groups.”

 

 

Edited April 24, 2021 by Randy W (see edit history)