Beijing’s crackdown on foreign currencies warns investors

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Beijing’s crackdown on Chinese companies has shocked the stock market, experts say China’s investment climate has changed and needs to be reassessed.

The recent sudden changes in laws and regulations governing business across multiple industries of the Chinese Communist Party administration remain a topic of debate and debate about its purpose, scope, and end. However, these actions more clearly show that the risk of investing in China is high.

“There is no doubt that what’s happening here. China’s investment carries unprecedented levels of risk,” the Heritage Foundation researcher Peter St. Onge told The Epoch Times. That’s it. “St. Onji used to be Senior He is a Fellow of the Institute for Economic Research in Montreal and a professor at Feng Chia University in Taiwan.

Among the many Chinese tech companies elected is Tencent, down about 30% from March 31, when the Canadian Pension Plan Investment Board (CPPIB) announced its holding of about $ 4.5 billion in Tencent shares. ..

CPPIB has announced plans to increase its investment in China to 20% by 2025 in 2018. As of March 31, CPPIB owns approximately $ 20.6 billion in Chinese stock, which accounts for just over 15% of approximately $ 134 billion. Foreign listed stocks.. CPPIB provides an initial public offering of shares only once a year and does not comment on any particular share.

Mr. St. Onji said that China will allocate 20% to China. Less than 10 percent Of the world stock market capitalization. He also exposed to high levels of regulatory risk than those existing investors in the same market, Xi Jinping Jintao of China was added that shows the increasingly authoritarian tendencies.

Another large Canadian investor in China Ontario Teachers’ Pension Plan.. I declined to comment on the Epoch Times.

Eliminate foreign influences

FXI, China’s largest exchange-traded fund, fell nearly 10% last month, but the North American stock market is nearing record highs.

Chinese ride-hailing company DidiRaised US $ 4.4 billion in an initial public offering (IPO) in June. This is the largest share sale by a Chinese company since Alibaba in 2014 and was the subject of a survey shortly after its market debut. Chinese authorities have cited national security and public interest concerns regarding the data they collect. Since then, Didi’s stock price has fallen by about 40%.

Gordon Chan, author of the Chinese expert The Coming Collapse of China, said China is closing its eyes on the world and trying to eliminate foreign influences.

“I think that’s it [Didi] It’s going to be a basin, and that’s one of the things that convinces Americans that China’s risk is too high, “Chan said. NTD“Wide angle” on July 31st.

As a government, private education companies are also involved in the Beijing crosshairs Banned Because these companies make a profit, raise money, and go public In late July..

China’s technology and education stock losses have exceeded US $ 1 trillion since February, according to the company. Bloomberg..

China is not only at a disadvantage in the public market. Venture capital declined in China for the second straight quarter, while all other major venture markets detailed in the CB Insight State of Venture Report in the second quarter of 2021 rose.

Business risk

Some investment managers may see the plunge in Chinese stocks as a potential purchase opportunity, but one of the fund managers who has not maintained their quota in China due to lack of personal freedom Perstall, Founder of Life + Liberty Indexes. She treats all Chinese companies as state-owned enterprises and states that all data they collect is government-owned.

“Currently, there is no exposure to China due to the exact reason the market is collapsing, lack of freedom, and invasion of large-scale control / private business activities by the government. Overnight due to the whimsical constraints of the government. The big hit names include Tencent and Meituan. ā€¯Tolle Tweet July 27th.

As of March 31, CPPIB holds approximately $ 1.4 billion in food delivery company Meituan.

St. Onji added that it is not a good sign for Canadian companies doing business in China, given that they often have to partner with Chinese companies.

“But terribly [the Chinese regime has] Having dealt with foreign investors in the past, they … seem willing to increase it now, “he said.

Shell game

Companies in many sectors of China are prohibited from owning foreign ownership and listing directly on foreign exchanges, said Gary Gensler. US Securities and Exchange Commission (SEC), July 30 statement.

By building China-based companies as Variable Interest Entities (VIEs) and establishing shell companies in separate jurisdictions to issue shares, these companies circumvent Beijing’s foreign capital funding restrictions. I was able to do.

VIE does not actually own a direct stake in a Chinese company, which poses a special risk to investors. Instead, they do not own shares in Chinese companies, but own the interests of offshore shell companies that are only relevant through service contracts and other contracts.

“I’m worried that the average investor may not be aware that they hold a stake in a shell company rather than a Chinese-based operator,” Gensler said.

“Investors face uncertainty about future actions by the Chinese government that could have a significant impact on the financial performance of operating companies and the enforceability of contractual arrangements,” he said. Added.

Mandated to protect investors in US capital markets, the SEC has suspended IPOs of Chinese companies unless it increases risk disclosure to investors.

St. Onji said Ontario’s securities regulators could follow the SEC’s initiative. Very few Chinese companies are listed on the Canadian Stock Exchange, most of them small and focused on the resource sector.

Rahul Vaidyanath

Rahul Vaidyanath

journalist

Rahul Vaidyanath is a journalist in The Epoch Times of Canada. His areas of expertise include economics, financial markets, China, and defense and security. He has worked at the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York and Los Angeles.



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