More thunder out of Beijing Friday suggested the storm is far from over for investors who’ve spent the last several weeks attempting to discern the limits of Xi’s sweeping regulatory crackdown.
China’s antitrust regulator is poised to hit Meituan with a $1 billion fine in connection with allegations of market abuse, the The Wall Street Journal said, noting that in addition to the fine, which “could be announced in the coming weeks,” Meituan would be compelled “to revamp its operations” and end “choose one out of two,” the exclusivity arrangement Beijing cited in the Alibaba probe earlier this year.
Needless to say, Meituan is “fully cooperating” with the probe and promised to comply with antimonopoly laws.
In July, Meituan shares were hit hard when the State Administration for Market Regulation ordered online food platforms to uphold the rights of delivery employees. Last week, the company attended a meeting convened on behalf of China’s Ministry of Industry and Information Technology. Attendees, which included Tencent, Alibaba, Xiaomi, ByteDance and Ant Group, were instructed to enhance oversight of data security protocols.
Meituan is China’s third-most valuable listed internet firm. The shares have been cut in half since the highs in February (figure below).
As Bloomberg noted, citing local media, Meituan was “previously found guilty of unfair competition in at least two legal cases and [has] rejected allegations it charged onerous commissions to restaurants during the COVID-19 outbreak last year.”
Meanwhile, Didi is considering whether to just hand over its data in order to placate Xi. The besieged ride-hailing giant, which had an Icarus moment last month after making the (unfathomably naive) mistake of moving forward with a US IPO despite being “advised” against the move by Chinese authorities, has entertained the possibility of “ceding management of its data to a private third party,” Bloomberg said, citing sources.
Naturally, China’s regulators want control over any such third party. But if the “third party” is state-controlled, it’s not really a “third party.” Rather, it’s just the Party. With a capital “P.”
Even that might not be enough, though. As Bloomberg went on to write, in the same linked article, it’s “unclear whether the proposals would appease the watchdog [as] regulators regarded its decision to go public… as a challenge to Beijing’s authority.” You don’t do that. You just don’t.
But wait, there’s more. Also Friday, reports indicated that Alibaba is cautioning investors about the financial implications of “dwindling” tax breaks. Beijing is ending preferential rates for some of the company’s businesses, sources said.
Apparently, Alibaba sees its effective rate more than doubling for the current quarter to 20% from 8% last year.
The rates in question apply to “Key Software Enterprises,” a designation that’s reviewed annually by Chinese tax authorities. There’s no guarantee that applicants will be approved.
I’ve said it dozens of times: The fundamentals don’t matter. Neither do the technicals. All that matters is the Party.
This will be us in a few years after Trump for one of his ilk takes over again.
Tucker Carlson is preparing the flock for the next Authoritarian “president” as we speak.
Yes and it is the wealthy that have to learn to kowtow.
While we gawk at internal anomalies about mask-wearing, we do little about China’s growing impact on our economy, its growing arrogance, and its autocratic desire to bully not only its own people but other countries.
China, to me, is a greater issue than willfully ignorant Americans that would rather not confront pandemic reality. And addressing the challenge of China needs to move forward on many fronts and by a variety of methods.
Sure, the Chinese have a huge swath of the market now, which we encouraged them to develop (back in the 70s). We also need to encourage and actively support broader manufacturing sources. Why not sign trade agreements, like the TPP? Why not buy more from Taiwan and Japan? Even Russia? How about helping to develop the manufacturing capacity of Guam? Bulgaria? Rumania? Ukraine? And India? I don’t care where alternate sources are provisioned. Alternate supply chains need to be developed for the US and western countries. Granted, the Chinese are educated and have learned how to mass-produce good products and deliver them. But India also does a good job of educating its people. Can we do more to help them further evolve their manufacturing capacity?
China gains leverage on the global manufacturing playing field in part by undervaluing the Yuan. Damn the Yuan at 15 cents. I don’t care how inexpensive it is. We need to develop alternative manufacturing sources. It may cost more. It may require further manufacturing innovation. But it’s worth keeping our democracy and telling the Chinese where to go. We can’t just go on sourcing from China a 20% proportion of our manufacturing.
I hope Joe Biden is considering these questions. I believe he is like-minded, but we don’t really know the full scope of his thoughts about this. In the meantime, alas, there are the country-agnostic money men behind the likes of Trump. Significant, moneyed, anonymous donors that care more about their money than about democracy or country may likely be influence on our China policies too. Please, no thank you.
unfortunately the US starting two unwinnable, unending, financially and humanistically devastating wars has emboldened China’s imperialism and economic reach…the deterioration of the US / developed world’s education systems and populace’ critical thinking parallels the international developments we are living with…
While the wealthy shop for Rhodium fiddles.
On Bill Maher few weeks ago a law professor stated her students were bright, attentive….’alright’……when Bill inquired about the state of minds of young people. More than half of American kids are incredibly uneducated, have no ability at critical thinking……not the scenario in China……the US brain trust relies heavily on Foreign students attending US Universities…..while they watch growing xenophobia within the ‘patriotic’ segment of the population……all countries sow the seeds of their own destruction…..