Ignore those harsh words and use that energy to spur you on to your next goal instead. — President Halimah Yacob to Singapore athletes who came home empty handed from the just-concluded Olympic Games to ignore the online criticisms
China signals its regulatory crackdown will go on for years
China released a five-year blueprint calling for greater regulation of vast parts of the economy, providing a sweeping framework for the broader crackdown on key industries that has left investors reeling.
The document, jointly issued on Aug 11 by the State Council and the Communist Party’s Central Committee, said authorities would “actively” work on legislation in areas including national security, technology and monopolies. Law enforcement will be strengthened in sectors ranging from food and drugs to big data and artificial intelligence, the document said.
“The people’s growing need for a better life has put forward new and higher requirements for the construction of a government under the rule of law,” it said. “It must be based on the overall situation, take a long-term view, make up for shortcomings, forge ahead, and promote the construction of a government under the rule of law to a new level in the new era.”
Investors have been seeking to make sense of a regulatory onslaught in recent weeks that has roiled markets, particularly after authorities banned profits in the US$100 billion ($135 billion) after-school tutoring sector. Over the past year, the Chinese authorities have launched anti-monopoly probes into some of the nation’s largest tech companies such as Alibaba Group Holding, while also implementing new rules for cybersecurity reviews on foreign listings that have created problems for Didi Global Inc.
“We can’t draw too much insight about enforcement and the potential shape of crackdowns from one document or another,” said Graham Webster, who leads the DigiChina project at the Stanford University Cyber Policy Centre. “Much depends on what bureaucrats and their higher-ups land on in terms of priorities month after month.”
The Aug 11 outline is an update of an earlier plan that ended in 2020. In an explanatory Q&A, officials responsible for the document highlighted modernisation of national governance, the need to build digital governance by law and increasing the public’s overall level of satisfaction.
While many of the sectors are consistent with what has been announced previously, the addition of food and drugs was new and would make investors nervous until new regulations are defined, according to Gary Dugan, CEO at the Global CIO Office.
“A five-year term to the crackdown at least gives definition to the time extent of the regulatory reset,” he said. “However, it will be a long time for investors to fret about pending changes.” — Bloomberg
HKEX has record IPO pipeline amid China crackdown, CEO says
Hong Kong exchange’s new CEO downplayed a regulatory crackdown by China that has dented the pace of IPOs and caused stocks to tumble in the financial hub, saying the bourse has a record pipeline of deals waiting in the wings.
About 200 companies have filed applications for IPOs at the Hong Kong Exchanges & Clearing (HKEX), marking a “significant and healthy” pipeline, Nicolas Aguzin said in an interview on Aug 11. The bourse has received “more and more” inquiries about listing in Hong Kong, even as some companies are evaluating market conditions and listing venues amid the regulatory moves, he said.
The exchange reported a drop in Q2 net income after a boom in IPOs abated toward the end of the first six months of the year. A regulatory onslaught from Beijing on its big technology companies and other sectors has shaken confidence, causing a selloff and putting some stock sale plans on hold.
“The Chinese authorities are in the long march to see how they are going to regulate this part of the industry, which is the new economy,” Aguzin said. The crackdown on big technology companies is a global phenomenon, he said.
China is also overhauling its rules for overseas IPOs, something that could benefit markets in Hong Kong. Chinese firms may, for example, be exempt from getting cybersecurity clearance if listing in the city, something they will need to sell shares in the US. Officials in the US have also stepped up scrutiny of Chinese listings and delisted some big companies.
HKEX shares fell as much as 4.7% on Aug 12 to HK$493 ($85.66), paring this year’s gain to about 17%. Daiwa Securities Group lowered its earnings forecast by up to 31% for the coming three years to reflect a lower assumption on average daily turnover.
“While we are positive on HKEX’s longer-term growth prospects, we see limited share price upside at the current valuation and potential consensus earnings cuts,” Citigroup Inc analyst Yafei Tian said in a post-earnings report with a target price of HK$490.
Aguzin took over the bourse in May from his predecessor Charles Li, who led the company for 10 years and oversaw a doubling in revenue as he tied the Hong Kong market closer to China by establishing trading links to investors in Shanghai and Shenzhen. The Argentine-native and veteran JPMorgan Chase & Co banker became the first non-Chinese to head the bourse, picked at a time of growing concerns over the status of the financial hub as Beijing tightens its control of the city.
A potential listing regime for blank check companies, to be released this fall, would also help boost the pipeline.
HKEX and the Securities and Futures Commission are launching a special purpose acquisition company (SPAC) consultation “in a few weeks”, Aguzin said. They aim to offer a high-quality listing framework to capture business opportunities while protecting investors, he said. — Bloomberg
Janet Yellen weighs visit to China, her first as Treasury Secretary
Janet Yellen is weighing a trip to China in the coming months that would be her first as US Treasury secretary, people familiar with the matter said, as the Biden administration engages in a broad review of policy toward the Asian power and the tariffs on imported goods enacted under former president Donald Trump.
The Treasury Department’s discussions on a possible Yellen visit are in the early stages and no decision has been made, with considerations including travel risks stemming from the delta variant of the coronavirus, the people said on the condition of anonymity because the deliberations are private. If the trip goes ahead, she would likely meet with Vice Premier Liu He — regarded as China’s top economic official — and would be the highest-ranking Biden appointee to visit the country.
In response to a request for comment, Treasury spokeswoman Lily Adams said: “There are no plans for Secretary Yellen to travel to China in the fall.”
A Yellen visit would mark the first face-toface economic talks with China under the Biden administration, after top State Department officials held contentious meetings on two separate occasions. A gathering in Alaska in March quickly descended into bickering and recriminations over human rights, trade and international alliances, while US officials visiting Tianjin last month heard counterparts say the US needed to stop criticising China’s political system and drop all sanctions and tariffs.
President Joe Biden has revealed a hard-edged stance toward China so far, though the Biden administration is still working toward completing a broad review of the US’s policy toward the nation. Officials have left in place the tariffs from the Trump administration, although Yellen has expressed scepticism of their effectiveness.
The goals of a potential trip for Yellen to China would include discussing common ground between the nations, such as climate change efforts, and also more difficult ones, such as trade, according to one of the people familiar with the matter.
Last week, more than 30 US trade groups called on the Biden administration to resume negotiations with China and remove tariffs, which they say are harming the American economy. Groups including the US Chamber of Commerce wrote to Yellen and US Trade Representative Katherine Tai urging the government to restart talks with China to ensure Beijing meets its commitments under the 2020 phase-one trade deal and increase purchases of American goods in the rest of 2021.
The US and China have left open the possibility of a summit between their presidents.
Biden, during his first overseas trip as president in June, focused on uniting allies to confront China. The administration has also framed proposed infrastructure spending as necessary to stay ahead of the world’s second-largest economy. But officials have said they will work with China if they think progress can be made.
US Treasury secretaries met with Chinese counterparts routinely until 2018 when a formal dialogue between the nations ended during the Trump administration. That line of communication, called the Strategic and Economic Dialogue, governed ties between the two countries during the Bush and Obama administrations. Yellen and her staff for now have no plans to resurrect it. — Bloomberg
Photo: Bloomberg
