This is from Wall Street Breakfast (a Seeking Alpha free public daily publication)
China’s government regulators are pushing some of the country’s biggest tech firms to give the state a stake, and a greater role in making corporate decisions, according to the WSJ. Internet regulators are discussing the prospect of 1% stakes in a number of firms, including Tencent Holdings (OTCPK:TCEHY), Weibo (NASDAQ:WB) and Youku Tudou - now part of Alibaba (NYSE:BABA). The stakes come with the stipulation that investors appoint a government official to company boards and have say in their operations. Even with a heavy hand in existing rulemaking, the regulators are concerned about the growing power of private business. The government has begun its “special management shares” project with two media start-ups, taking stakes of less than 2% in mobile news site Yidian Zixun (NYSE:FENG) and Beijing Tiexue Tech, which operates a “patriotic news site.” The report comes ahead of the Communist Party Congress, with the party pressing to take a greater role in Chinese society.
Sounds pretty chilling to me. The tip of the elephant’s trunk. Another clarification of why I won’t invest in Chinese companies.
The Chinese government is pushing some of its biggest tech companies—including Tencent, Weibo and a unit of Alibaba—to offer the state a stake in them and a direct role in corporate decisions.
Sounds pretty chilling to me. The tip of the elephant’s trunk. Another clarification of why I won’t invest in Chinese companies.
yes, chilling, but don’t think they can put the genie back in the bottle. Time will tell.
I would not mind a US law that said US based companies cannot sell in countries that demand they expose their technology as a condition of market access, that is more chilling to me. One treat to Trump and we have a new executvie order
Saul,
While I agree with you in principal (and I guess in practice as well), I wish to point out that the Beijing government has always been leery of the free flow of information, and to some extent, for good reason.
I am 100% confident that this move is driven at least in part due to the Russian meddling in the US election. I won’t expound upon this line of reasoning as it is a political issue and I wish to respect your desire to keep this board apolitical. But, in a way, this is not all bad.
It is absolutely all bad because for China it is gangrene on the heel of progress; a traumatic refutation of and shock to the free market; a barricade erected against inward investment.
Unfortunately, many members of the EU Commission would like to do the same.
So it is opportunity for America. Given the simple choice between investing in US company X or directly comparable Chinese company Y where all things are equal except Y is controlled and restricted in its actions by the state outside the Rule of Law, who would not choose X?
Forward The Great Republic! Let others inculcate gangrene and have it fester (I do not think this is political, but if so, profuse apologies etc.)
It is absolutely all bad
Maybe not Strelna. As a free marketeer and a libertarian I shudder, however - and to borrow a great American expression… “it is better to have them inside the tent pis$ing out than outside the tent pis$ing in”.
Ant
ps I think it is remarkable that the real spelling of pis$ing is considered a profanity and was blocked.
Sounds pretty chilling to me. The tip of the elephant’s trunk. Another clarification of why I won’t invest in Chinese companies.
Saul
Thanks for the insight. It is relevant to me since I now have quite a bit invested in Chinese stocks. I am always concerned about government interventions in the market and that is why I don’t have even more invested in China. Plus, I like diversification. But I see government interventionism in every country. And certain sectors in the US seeem to be greatly impacted in this regard. Health care (a sector I work in)seems to be one such case and that’s why I own only two health care related stocks (ILMN and SYK). The education and mortgage industries in the US have been in turmoil in recent years due to government interventions.
I agree with Saul. He and several investing columnists have confirmed something I had concluded a while back. I think it’s too easy to get blindsided holding stock in Chinese companies.
The American game is far from 100% clean, but we know the game a lot better, and we’ve learned warning signs over the years.
I previously posted I am 100% confident that this move is driven at least in part due to the Russian meddling in the US election.
I have been challenged about that comment and my confidence level. Here’s my reasoning. Notice the companies specifically targeted are all engaged in social media. It could be that the WSJ list is not complete, but assuming their reporting is accurate, the only companies engaged by this action are similar to Chinese versions of Facebook and Twitter. These companies have tremendous influence over public opinion in China.
Further, if you look at the history of China, every time a government has been overthrown (after the unification of the seven states) has always been for the same reason; public opinion, en masse, has gone against the existing power structure. The CCP is acutely aware of the dangers of mounting negative public opinion. This is the reason that Xi Jinping made busting corruption a major part of his administration and the reason he’s been largely successful at reducing government corruption (business corruption remains largely unaltered except where it directly intersects with government officials).
It’s always difficult and dangerous to read between the lines, but from my perspective this one is pretty clear. Beijing has been deeply concerned about what is posted on social media for a long time. The Russian intervention in the US political process has heightened that concern. They want to be in front of potential efforts to sway public opinion in China.
And, even going back to the days of Mao and Khrushchev, there has been deep distrust of the Chinese with respect to Russia.
Weird, I’m replying to my own post. This blog does not allow edits to previous posts . . .
Just wanted to point out this little tidbit I just read:
Facebook executives will soon testify before Congress, which may impose new regulations on social-media platforms that have largely evaded government intervention up till now.
It appears that the Chinese might not be the only country that might be taking a more aggressive governmental role in certain company’s business. It’s not exactly the same government action as the Chinese, they’re not threatening to take an ownership position and a seat on the board. But it’s not a lot different in effect (if it occurs) given the two different forms of government.
I know many on this board subscribe to Rule Breakers and Stock Advisors. These services have recommended Chinese companies such as BIDU, MOMO and ED. While these are obviously high growth companies, do you include these in companies to stay away from?
I know many on this board subscribe to Rule Breakers and Stock Advisors. These services have recommended Chinese companies such as BIDU, MOMO and ED. While these are obviously high growth companies, do you include these in companies to stay away from?
Hi hydemarsh,
Yes I subscribe to both Rule Breakers and Stock Advisors, and no, I won’t buy those Chinese companies either. There are plenty of companies that are high growth without being Chinese. But that’s just me. The people who have invested in some of those stocks have done well, so far.
I do. I have a blanket rule, I don’t invest in Chinese companies. It’s just not worth the effort to try and figure out which ones are legit. IMO size is not indicative of trustworthy management.
I’m not suggesting that you follow my lead on this. It’s just the way I look at it. If you think TMF has flawless investigatory analysis, ot you just think the big ones are “safe” or whatever, don’t let my attitude get in your way.
