The regulatory environment in China seems to be in constant tumult, but Beijing is trying to convince the world its support for private business and foreign investment remains intact.
Vice Premier Liu He, President Xi Jinping’s top economic adviser, said in a speech Monday that policies supporting the private sector “don’t change now and will not change in the future.” The People’s Daily, the Communist Party’s flagship publication, followed Wednesday with a front-page editorial that stressed opening to the outside world “will not waver at any time.” Those pronouncements came after Xi pledged late last week to continue opening China to foreign investment.
With financial markets and corporate executives stunned by the recent moves against after-school tutoring, big tech and overseas IPOs, there was clearly a need to assure the business community, both at home and abroad, that Beijing’s political priorities had not turned against them.
There’s another important audience for that message at home too. A rare public debate that’s emerged in state media about what “common prosperity” is all about suggests there’s disagreement within the sprawling bureaucracy over what Xi and other senior leaders want to achieve.
One widely circulated essay in state media called the recent regulatory crackdown a “profound revolution” that will no longer allow capitalists to get rich overnight. The piece, written by Li Guangman, a retired newspaper editor turned blogger, was rebutted a few days later by Global Times editor Hu Xijin, who argued that the goal was gradual social progress, not some sort of second Cultural Revolution.
The stakes are obviously high. If Beijing hopes to narrow the wealth gap without smothering economic growth, it’ll need cadres in the provinces to toe the line and the CEOs of multinationals to keep on investing.
Still Seeking ‘Common Prosperity’
The quest for “common prosperity” isn’t going anywhere. Some of this week’s developments include:
Quantitative Trading
Running a quant fund is a difficult thing to align with the push for “common prosperity.” While computer-driven trading strategies can help enhance market liquidity and pricing efficiency, the overall social benefits are somewhat limited. And then of course there are the high salaries. Those things add up to an invitation for regulatory scrutiny.
On Monday, China Securities Regulatory Commission Chairman Yi Huiman said in a speech that quants and high-frequency traders can increase volatility and unfairness in markets. Officials from the agency then followed up by having conversations with various quant funds in China, ostensibly to better understand their operations.
While there have been calls for greater scrutiny of quant trading, authorities have yet to take any concrete steps against the industry. But with a recent surge in the number of such products being offered and growing concerns about the country’s wealth gap, it’s hard to rule out that some might be coming soon.
Hedge Fund Mania
China's biggest funds launch hundreds of products as demand rises
Source: Shenzhen PaiPaiWang Investment & Management Co.
* number of product launches this year as of August
Another Blow to #MeToo
The sexual-assault case that’s recently rocked China culminated in prosecutors deciding Tuesday not to file criminal charges against an ex-Alibaba manager accused of rape by a female subordinate.
Prosecutors in the northern city of Jinan were investigating whether to charge him with “forcible indecency,” a broad category that encompasses sexual assault, after police said last month they found no evidence of rape. Ultimately, they said they also couldn’t find enough to show what the man did constituted a criminal offense.
This case shocked many when it first became public in early August and had gathered so much attention that it rekindled broader discussions about China’s #MeToo movement. Many on social media worried this development could end up suppressing reports of abuse instead of encouraging women to speak up.
Guinea Hits China’s Supply Chains
The resilience of Chinese supply chains was in focus as a result of a military coup in Guinea. That’s because the West African nation supplies more than half of China’s bauxite, the reddish ore that is processed to produce aluminum. While the coup’s leader, Colonel Mamady Doumbouya, has said he wants mining and production to continue, the unrest caused enough concern to push the price of the metal to a decade-high on Monday.
China has been warned before that depending too much on Guinea could leave it susceptible to supply shocks, but there’s no easy solution to that. Indonesia, which was once the world’s largest producer, became a much less attractive place to source bauxite since the imposition of export restrictions for unprocessed minerals. The world’s other big supplier is Australia, which is a disagreeable option as well because of a multi-year diplomatic row over everything from trade to the origins of Covid. Guinea, unluckily for China, might have been the least bad of many bad choices.
What We’re Reading
And finally, a few other things that caught our attention:
"really" - Google News
September 10, 2021 at 10:00AM
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Next China: Still Open for Business (Really) - Bloomberg
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