“The donation doesn’t guarantee that there will not be more regulations target[ing] Alibaba,” one analyst quoted by Bloomberg said, at the end of another nerve-racking week for Chinese tech shares.
The reference was, of course, to Alibaba’s attempt to placate Beijing with a $15.5 billion commitment to Xi Jinping’s “common prosperity” initiative.
Apparently, some investors are concerned the company is just squandering profits on what amounts to a shakedown. Although the stock managed to eke out a weekly gain in Hong Kong, the shares dropped almost 4% Friday. The Hang Seng Tech Index fell for the first time in four days.
It’s amusing how the narrative changed over just 24 hours. On Thursday, some market participants seemed to believe that China Inc.’s obsequious pandering and pledges were money well spent. By Friday, the idea of handing over shareholder wealth on the possibly misguided hope that Xi will back off, was viewed with trepidation.
Read more: Icarus, Your Wings Are Melting
News flow around Xi’s sweeping effort to “right” various social “wrongs” didn’t let up headed into the weekend. In fact, it took another (sharp) turn for the absurd.
Chinese culture will “no longer be a paradise for sissy stars,” The National Radio and Television Administration said, in a decree that effectively banned dissent of any kind. News and public opinion cannot take the “position [of] worshiping Western culture,” and vulgar displays of wealth will not be permitted.
Ominously, the regulator commanded broadcast and television organizations as well as online platforms to “strictly” vet actors and guests and exclude “those who have incorrect political positions and who are alienated from the Party.” Additionally, anyone deemed to be in violation of “good customs” or who’s judged to have “lost morality in their words and deeds” will not be allowed on television. Or at least as far as one can tell from the translated bulletin.
But wait, there’s more. Actors will have their pay regulated too. In the same notice, the regulator said “high-priced film pay” will be “resolutely resisted” going forward. Pay caps for actors will be “strictly implemented” and they (actors) are “encouraged to assume social responsibilities and participate in public welfare programs.” Violations of film pay caps will be “severely punished.” The “temptation” of fame and wealth must be “consciously resisted.”
You can read the full order here, although as always, I’d remind readers that Chinese government websites aren’t secure, figuratively or literally.
That wasn’t the only news Friday. The Didi saga looked set to dead end in a state takeover by Beijing’s municipal government. “Under the preliminary proposal, Shouqi Group — part of the influential Beijing Tourism Group — and other firms based in the capital would acquire a stake in Didi,” Bloomberg reported, citing people familiar with the discussions, who said “scenarios under consideration include the consortium taking a so-called ‘golden share’ with veto power and a board seat.” The linked article included the obligatory mention of an attempt to contact relevant officials in Beijing by fax — with no success.
Somehow, market participants are supposed to be comforted by Xi’s decision to launch a new stock exchange for SMEs. As if all you need to do to prove your commitment to markets and capitalism and thereby pacify international investors is pave the way for some new listings.
Meanwhile, there was more evidence that the economy is decelerating. The Caixin services gauge followed its official counterpart into contraction territory in August, data out Friday showed (figure below).
“Supply, total demand, overseas demand and employment all shrank, indicating the immense pressure on the services sector stemming from the reappearance of COVID,” Wang Zhe said, in the color accompanying the Caixin survey, which called the Delta wave “a severe challenge to economic normalization.”
Meanwhile, the PBoC rolled out the usual list of pledges and promises in a new financial stability report. Monetary policy will be “targeted” and “prudent,” and there won’t be any “sharp turns.”
I found it somewhat incongruous in the context of all the new regulations and restrictions that Xi apparently intends to establish a new Beijing stock exchange aimed at encouraging and supporting innovation and business development (?shrug).
I continue to look for a prudent way to maintain exposure to Chinese equity. As far as I can tell, you have to target favored industries (semi, pharma, AI?), smaller cap and domestic listings (A share?), avoid an ever-lengthening list of risk factors (some subjective and imponderable), and still somehow be able to do competent due diligence and security selection. Which no-one outside of China can, so that steers you toward specialist active fund managers, but most of them got caught in Xi’s undertow and those who outperformed did so by underweighting China which defeats the purpose. Ugh. Apologies to the pundits still pitching BABA et al, but seeking or maintaining China exposure is looking like more trouble than its worth at this moment.
Between watching China, the US, and specifically my own home of Texas, I can’t help but marvel at how rapidly humanity can spread madness when we really try.
Apparently we should expect that gray sackcloth will become the new rage sweeping Chinese fashion. This may be the red line of civilian discontent that Xi really ought not to have crossed.
Regarding the even zanier state of affairs in Texas, the old angry joke was that Texas was a prime contender for adopting Americanized sharia. But now, the new angry joke is that the Taliban are likely to dump sharia in favor of the ‘greater rectitude’ of the Texas State Constitution and Statutes. Such a move, at the very least, would eliminate the dual threats of democracy and civil liberties ever emerging in Afghanistan.
Sigh.