SEC Moves a Step Closer to Delisting Chinese Companies in the U.S. By Benjamin Bain and Robert Schmidt 3 December 2021 https://www.bloomberg.com/news/arti...delisting-chinese-companies?srnd=premium-asia SEC announces final rule requiring firms to open their books Agency outlines criteria for delisting foreign companies The U.S. government is inching further on efforts to boot Chinese companies off American stock exchanges for not complying with Washington’s disclosure requirements. The Securities and Exchange Commission on Thursday announced its final plan for putting in place a new law that mandates foreign companies open their books to U.S. scrutiny or risk being kicked off the New York Stock Exchange and Nasdaq within three years. China and Hong Kong are the only two jurisdictions that refuse to allow the inspections despite Washington requiring them since 2002........
A disgraceful example of turning a blind eye, rule bending and non enforcement. Another example of the West bending over backward to appease China.
China Stock Losses in U.S. Top $1 Trillion on Delisting Fear By Matt Turner 4 December 2021 The Nasdaq Golden Dragon China Index falls 9.1% Friday Didi says it plans to delist from the New York Stock Exchange A brutal 2021 selloff for Chinese stocks trading in the U.S. has now erased more than $1 trillion in value since February and shows no signs of easing as regulators on both sides of the globe continue to put pressure on the firms. The Nasdaq Golden Dragon China Index -- which tracks China-exposed firms listed in the U.S. -- plunged 9.1% on Friday, the most since 2008, after Didi Global Inc. said it plans to delist its shares from the New York Stock Exchange. The slump came amid a broader drop in equities on the day, with technology shares bearing the brunt of the decline. The Didi announcement marks a stunning reversal of fortunes after the firm raised $4.4 billion in an initial public offering in late June, and adds even more uncertainty to the prospects for other U.S.-listed Chinese firms. Didi fell 23% at its weakest on Friday, extending the ride-hailing giant’s slump to more than 50% below its $14 IPO price. “This represents the steady march toward the required de-listing of Chinese companies from U.S. exchanges,” Cowen & Co. analyst Jaret Seiberg wrote in a note. “We do not believe Congress or the SEC see the value of letting Chinese firms list in the U.S. as worth the cost of not being able to inspect the audits.” Here’s a look at how China stocks in the U.S. have fared amid the increased scrutiny:..... Continues....
Stay on Guard When Investing in China, Expert Says. ‘Expect to Be Blindsided Again.’ By Reshma Kapadia Updated December 13, 2021 / Original December 9, 2021 Muddy Waters’ Carson Block in Austin, Texas. Photograph by Josh Huskin Carson Block has long been an outspoken skeptic of Chinese stocks. The activist short seller has raised red flags about corporate malfeasance, accounting irregularities, and outright fraud in the case of Luckin Coffee last year, and has called on regulators to delist Chinese companies from U.S. exchanges. Regulators are paying more attention: The Securities and Exchange Commission released rules earlier this month for delisting Chinese companies that won’t comply with U.S. auditing standards, allowing for a three-year transition for now. Continues......
https://www.afr.com/world/north-ame...nies-including-dronemaker-dji-20211215-p59hw6 Dronemaker DJI among 8 Chinese companies being added to US blacklist Demetri Sevastopulo and William Langley Dec 15, 2021 Washington/Hong Kong | The Biden administration will place eight Chinese companies including DJI, the world’s largest commercial drone manufacturer, on an investment blacklist for their alleged involvement in the surveillance of the Uighur Muslim minority. The US Treasury will put DJI and the other firms on its “Chinese military-industrial complex companies” blacklist on Thursday (Friday AEDT), according to two people briefed on the move. US investors are barred from taking financial stakes in the 60 Chinese groups already on the blacklist. A DJI drone is demonstrated outside the company’s Shenzhen headquarters. The measure marks the latest effort by US President Joe Biden to punish China for its repression of Uighurs and other Muslim ethnic minorities in the north-western Xinjiang region. SenseTime, the facial recognition software company, last week postponed its planned initial public offering in Hong Kong after the Financial Times reported that the US was set to place the company on the blacklist. The other Chinese companies that will be sanctioned on Thursday include Megvii, SenseTime’s main rival that last year halted plans to list in Hong Kong after it was put on a separate US blacklist, and Dawning Information Industry, a supercomputer manufacturer that operates cloud computing services in Xinjiang. The other companies to be added to the CMIC blacklist are CloudWalk Technology, a facial recognition software company; Xiamen Meiya Pico, a cyber security group that works with law enforcement; Yitu Technology, an artificial intelligence company; Leon Technology, a cloud computing company; and NetPosa Technologies, a producer of cloud-based surveillance systems. DJI and Megvii are not publicly traded, but Dawning Information, which is also known as Sugon, is listed in Shanghai, and Leon, NetPosa and Meiya Pico trade in Shenzhen. All eight companies are already on the commerce department’s “entity list”, which restricts US companies from exporting technology or products from America to the Chinese groups without obtaining a government licence. The White House did not comment and Treasury did not respond to a request for comment. From review to implementation DJI declined to comment. But last year it said it had “done nothing to justify being placed on the entity list” after it was added to the Commerce Department’s export blacklist at the end of Donald Trump’s term as president. The department is also expected to place more than two dozen Chinese companies on the entity list on Thursday, including some involved in biotechnology, according to the people familiar with the pending action. The Commerce Department did not respond to a request for comment. The sanctions action comes as the US has maintained a tough stance over China’s policies in Xinjiang, where more than 1 million Uighurs and other minorities have been held in detention camps. The White House last week announced a diplomatic boycott of the 2022 Winter Olympics in Beijing. The Biden administration on Thursday will also consider tightening rules on US companies selling technology to Semiconductor Manufacturing International Corp, the largest Chinese chip manufacturer. The Trump administration put SMIC on the entity list a year ago, but the decision included a provision that critics said created a loophole that some companies had exploited. Eric Sayers, head of the Indo-Pacific practice at Beacon Global Strategies, a consultancy, said Mr Biden was moving into the implementation phase after reviewing many of his predecessor’s technology policies. “It will be interesting to watch if these targeted but significant steps are just the beginning of a more aggressive approach being driven by the White House or the minimum the inter-agency can muster for now,” Mr Sayers said. “If it’s the former, we could see further restrictions on SMIC and new outbound investment restrictions in the months ahead.” In another example of Washington’s escalating confrontation with Beijing over Xinjiang, the US House of Representatives unanimously passed a bill on Tuesday (Wednesday AEDT) that would ban imports from the region unless companies could prove the goods were not produced with forced labour. The House and Senate earlier reached agreement on a compromise draft of the bill, setting the stage for a vote in the upper chamber of Congress before senators recess for the year-end holidays. The White House welcomed the agreement over the Uighur Forced Labor Prevention Act. Sophie Richardson, China director at Human Rights Watch, called for Mr Biden to sign the legislation “immediately” after it was passed by Congress. “Beijing and businesses have long banked on a global willingness to put profits ahead of humans’ rights – even in the face of crimes against humanity,” Ms Richardson said. “Congress rightly shifted the burden of proof to Xinjiang authorities and to companies.” Jewher Ilham, an activist whose father, Ilham Tohti, a Uighur rights advocate, was jailed for life by China on widely criticised charges of separatism, said it was “promising” that Congress had reached a deal to hold companies “accountable for their complicity in the world’s worst forced labour regime”. Financial Times
https://www.smh.com.au/business/mar...wealth-evaporate-in-2021-20211230-p59ksq.html ‘Best days are behind us’: China’s tech moguls see $110 billion of wealth evaporate in 2021 By Venus Feng December 30, 2021 It’s been a record year for China’s internet moguls, but not in the way most would have hoped. The country’s 10 richest tech tycoons lost $US80 billion ($110 billion) in combined net worth in 2021, according to the Bloomberg Billionaires Index, amid widescale crackdowns by Chinese regulators. The drop represents almost a quarter of their total wealth and is the largest one-year decline since 2012, when the index started tracking the world’s richest people. Pinduoduo founder Colin Huang has lost two thirds of his fortune this year.Credit:Bloomberg Pinduoduo founder Colin Huang lost the most this year -- $US42.9 billion, or two-thirds of his fortune -- as shares of his e-commerce platform plunged nearly 70 per cent. Alibaba Group’s Jack Ma, who has been keeping a low-profile since authorities clamped down on his sprawling business empire, has seen his wealth cut by about $US13 billion. Few people better embody this year’s wealth roller coaster than Didi Global founder Cheng Wei. In the weeks before Didi’s US listing in June, investors snapped up stakes in secondary-market trades, pushing the ride-hailing giant’s valuation to $US95 billion and sending the value of founder Cheng’s stake to $US6.7 billion. The euphoria was short-lived. The Beijing-based company’s shares have plummeted more than 60 per cent since Chinese officials announced an investigation and asked it to delist from the New York Stock Exchange, leaving Cheng’s fortune at $US1.7 billion. Increased antitrust scrutiny from Chinese regulators has become increasingly common since the surprising halt of Ant Group’s initial public offering last year. Tech companies including Alibaba, Tencent Holdings, Meituan and Pinduoduo have seen their once lofty valuations trimmed after being fined for reasons ranging from monopolistic practices to disrupting market orders to under-reporting deals. China’s former tech superstar Jack Ma has largely disappeared from public view.Credit:AP China is also paying more attention to a loophole long used by the country’s technology industry to get past some government restrictions and raise capital from foreign investors. Uncertainty prevails even after China unveiled sweeping regulations governing overseas share sales by the country’s firms, threatening to amp up scrutiny over IPOs abroad that had proceeded virtually unchecked for two decades. Lying low At the same time, the Securities and Exchange Commission this month announced its final plan for a new law that mandates Chinese companies open their books to US scrutiny or risk being kicked off the New York Stock Exchange and Nasdaq within three years. That could mean hundreds of Chinese companies delisting from the US markets and relisting in Hong Kong or mainland China. “The best days for China’s tech sector are behind us for now,” said Chen Zhiwu, director of the Asia Global Institute at the University of Hong Kong. “Without access to American capital markets, the history of China’s tech sector would have been very different.” ByteDance founder Zhang Yiming is a rare Chinese internet tycoon to see his fortune grow this year, gaining $US19.5 billion based on a valuation in a SoftBank filing this year. That’s partly due to his keeping the parent of TikTok a closely held company, insulated from the swings of market turbulence. But Zhang has also strived to keep a low-profile during the regulatory crackdowns. In May, he announced he was stepping down as chief executive officer and then quit the board last month. Many tech executives have made similar moves. Su Hua, co-founder of livestreaming app Kuaishou Technology, ceded the CEO role in November only nine months after the company’s IPO in Hong Kong. In September, JD.com named a new president, saying that Chairman Richard Liu will focus on long-term strategies. Charitable donations Even with the loss in personal wealth, some Chinese tech billionaires have upped their philanthropy in response to President Xi Jinping’s admonitions for “common prosperity” to address social inequality. Xiaomi’s Lei Jun and Meituan’s Wang Xing have donated stakes worth $US2.2 billion and $US2.3 billion, respectively, to charity, which has partly contributed to their dented fortunes. Through the end of August, Chinese billionaires had donated at least $US5 billion to charity in 2021, 20 per cent more than total national giving the previous year, according to data compiled by Bloomberg News. With iconic tech billionaires like Jack Ma receding from public prominence, the industry needs to reshape its core strategy for new growth in the future, HKU’s Chen said. “I think good days will return at some point after some soul-searching and reassessment of what drove the golden days of the past two decades,” Chen said. Bloomberg
Opinion China’s ‘common prosperity’ agenda shows every sign of backfiring By Jeremy Warner January 21, 2022 https://www.smh.com.au/business/the...every-sign-of-backfiring-20220119-p59pcx.html China, land of perpetual growth and boundless opportunity, forging its way to a glorious future of global hegemony and unchallenged economic prowess under the inspired and benevolent leadership of the all-powerful President Xi Jinping. The West’s political leaders may all be at a befuddled loss over how to deal with an ever more assertive China, but our major corporations and financial institutions cannot get enough of it. However grovelling the kowtow required, if it secures a foothold in Chinese markets, it’s judged worth the humiliation. China’s economic growth slowed markedly in the fourth quarter of last year, prompting the government growth slowed markedly in the fourth quarter of last year, prompting the People’s Bank of China to cut interest rates and easing credit restrictions anew.Credit:Getty Time for a reality check. This may come as a surprise, but China was the world’s second-worst performing stock market last year, ranking 58th out of 59, only marginally ahead of Pakistan - this despite seeming to have had a far better pandemic than virtually all Western counterparts. The long-term picture scarcely looks any better. Over the past 30 years, Chinese stock markets as measured by the MSCI China Index have delivered a paltry 1.76 per cent annualised rate of return, compared to 7.47 per cent for emerging markets as a whole and 10.72 per cent for the US S&P 500. Yet, China’s GDP has expanded by more than 30 times during that period, much more than any other emerging market and way, way ahead of the US. It cannot be stated often enough that the stock market is not the economy, especially when it comes to China, where investing in stocks and shares is essentially just a form of high stakes gambling. Even so, China’s relative lack of performance tells us quite a bit about the fault lines that lie behind the apparent economic miracle, and casts considerable doubt on its durability. Overinvestment, poor standards of corporate governance and accountability, government expropriation, lack of legal protection, political corruption, unreliable reporting both of corporate profits and the wider economy, growing geopolitical tension with the West, the sabre rattling over Taiwan - it all tells its own story of a country which from an investment perspective still leaves an awful lot to be desired. In a speech via videolink to the World Economic Forum annual meeting this week, Xi presented a confident and determined face to the world, insisting that China remained very much open to foreign business and investment. Yet amid a series of crackdowns on fintech, private education, gaming, social media, celebrity culture and what are described in faintly homophobic terms as the “sissy boys” of “effeminate” fashion, it is increasingly hard to conclude that he means it. And that’s before we even get to the uproar over treatment of the Uyghurs and the suspension of democratic freedoms in Hong Kong, which was already giving Western business leaders plenty of pause for thought. From the outside, Xi’s “common prosperity” agenda looks like an ill-thought-through mess that far from bequeathing the alternative economic growth model he seeks threatens a destabilising inflection point that might ultimately bring him down, however unassailable his position now appears. It is often said that China only excels when it looks outwards rather than inwards, an observation seemingly confirmed by the acute economic stagnation and decline of Maoist isolationism. Mao aspired to social equality, but delivered only the “equality of poverty”. This grimly destructive period of introspection was brought to an end by the free market reforms of Deng Xiaoping, when China re-engaged with the rest of the world. A golden age of stellar economic growth duly followed. But it has left a difficult legacy of rising expectations, over investment, mountainous debt and undue reliance on a booming construction and real estate sector. In seeking to address these imbalances, Xi is again turning China in on itself, and in reverting to the Maoist tradition, clamping down hard on any supposed threat to his own leadership in the process; a more self-reliant egalitarian economy that places China at the forefront of technological innovation is promised in return. China’s sharemarkets continue to struggle.Credit:AP It seems unlikely that this combination of rediscovered socialist intent and state-directed allocation of capital will succeed. By attempting to switch to a different kind of economy, Xi risks disappointing the expectation of never-ending growth which he himself has done so much to fuel, and thereby creating the very same economic and political instability he wishes to lance. As it is, growth slowed markedly in the fourth quarter of last year, prompting the People’s Bank of China to again row back on attempts to quell the excesses of recent years, cutting interest rates and easing credit restrictions anew. It’s part of a pattern whereby every economic setback is met with another round of stimulus, further exaggerating the imbalances the high command wants to get rid of. There seems to be no other way of sustaining the growth. Part of the current slowdown is admittedly cyclical. After the sharp rebound from COVID, things were eventually bound to come off the boil. The slowdown is also substantially self-inflicted. The regime has been particularly heavy-handed in its zero-tolerance approach to the spread of the latest, omicron COVID variant, sealing off cities and ports, closing roads and suspending air and rail links. Disappointing levels of protection from homegrown vaccines have confined Beijing to the blunt instrument in tackling the disease of further economically damaging lockdown measures. Anything to avoid disrupting the Winter Olympics, scheduled to begin in a few weeks time and viewed by the regime as another opportunity to showcase Chinese ascendancy. The restrictions may therefore be somewhat eased after the event is over. But it’s my guess that structural weaknesses in the Chinese economy and body politic are also starting to take their toll. That line of thought may of course be just wishful thinking on the part of another resentful Westerner keen to see a worryingly assertive China get its comeuppance. A seriously underperforming stock market, on the other hand, powerfully suggests both that China’s economic miracle is not all it’s cracked up to be, and that its political hierarchy is not as secure as it seems. Telegraph UK
Wall Street’s Big Bet on Chinese Markets Is Going All Wrong Mainland shares enter their first bear market since 2018 China’s support measures were expected to drive stock gains By Sofia Horta e Costa 28 January 2022 https://www.bloomberg.com/news/arti...-markets-is-going-all-wrong?srnd=premium-asia The bar for China’s financial markets to do better this year was so low, virtually everyone on Wall Street was saying the country’s stocks and bonds could only go up. That bet isn’t going so well. Mainland equities just entered their first bear market since Donald Trump’s trade war. Shares in Hong Kong had their worst week in five months, with short sellers feasting like never before. Credit-market contagion is spreading to some of the strongest property developers for the first time. Assets that were previously resilient like China’s currency and government bonds are no longer immune, with the yuan turning the most volatile since August........ .....Most of Wall Street is counting on a 2022 rally in China. Societe Generale SA, Goldman Sachs Group Inc., BlackRock Inc., UBS Group AG and HSBC Holdings Plc have all turned overweight on Chinese equities. JPMorgan Chase & Co.’s Marko Kolanovic in December recommended going all in on China this year, predicting the MSCI China Index would surge almost 40%. Morgan Stanley’s Jonathan Garner is the notable holdout, saying there may be more pain in store for Chinese shares......