China Business and Finance Update
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The author is the chairman and founder of Soros Fund Management and Open Society Foundation
Chinese leader Xi Jinping has clashed with economic reality. His suppression of private enterprises seriously dragged down the economy. The most vulnerable sector is real estate, especially housing. In the past two decades, China’s real estate boom has continued to heat up, but it is now coming to an end. Evergrande, the largest real estate company, Excessive debt And there is a risk of breach of contract. This may cause a crash.
The root cause is China’s birth rate Far below the statistics. The official report greatly exaggerates the population. Xi Jinping inherited these demographic data, but his efforts to change these demographic data made the situation worse.
One of the reasons that middle-class families are reluctant to have one more child is that they want to ensure that their children have a bright future. As a result, a large tutoring industry dominated by a Chinese company backed by US investors has grown.This type of for-profit tuition company recently prohibit From China, this became Sold out Chinese companies and shell companies listed in New York.
this Suppress The Chinese government is real.The financial market did not notice that the Chinese government quietly bought a stake in TikTok, the owner of Bytedance and won a seat on the board of directors. In aprilThis move allows Beijing to obtain a seat on a three-person board of directors and gain direct access to the internal operations of a company that has one of the world’s largest personal data treasure troves. The market is more aware that the Chinese government is acquiring influential shares of Alibaba and its subsidiaries.
Xi Jinping does not understand how the market works. As a result, the sell-off was allowed to go too far. It began to damage China’s goals in the world. Recognizing this, the Chinese financial authorities have done their utmost to appease foreign investors, and the market has responded with a strong rebound. But that is a deception. Xi Jinping views all Chinese companies as tools of a one-party state. Investors who bought the rally are facing a clear understanding. This includes not only investors who are aware of what they are doing, but also more people who invest through pension funds and other retirement savings.
Pension fund managers allocate their assets in a manner that is closely related to the benchmarks against which they measure their performance. Almost everyone claims that they incorporate environmental, social and corporate governance (ESG) standards into their investment decisions.
The MSCI All Country World Index (ACWI) is the most widely followed benchmark by global equity asset allocators. It is estimated that $5tn is passively managed, which means that it replicates the index. The multiple of this number is actively managed, but it also closely tracks the MSCI index.
In MSCI’s ACWI ESG Leaders Index, Alibaba and Tencent are two of the top 10 constituent stocks. In BlackRock’s ESG Aware Emerging Markets Exchange Traded Fund, Chinese companies account for one-third of the total investment. These indexes have effectively forced American investors to invest hundreds of billions of dollars in Chinese companies whose corporate governance does not meet the required standards—power and accountability are now exercised by a person who is not responsible to any international authority.
The US Congress should pass a bipartisan bill that clearly requires asset management companies to only invest in companies whose actual governance structures are both transparent and consistent with stakeholders. This rule should obviously apply to the performance benchmarks of pension and other retirement portfolio choices.
If Congress enacts these measures, it will provide the U.S. Securities and Exchange Commission with the tools it needs to protect U.S. investors, including those who do not know the ownership of Chinese stocks and Chinese shell companies. This is also in the interests of the United States and the wider international democratic society.
Gary Gensler, chairman of the US Securities and Exchange Commission, has repeatedly warned the public about the risks of investing in China. But foreign investors who choose to invest in China find it very difficult to recognize these risks. They have seen many difficulties facing China and have always overcome them with excellent results. But Xi Jinping’s China is not the China they know.He is installing a newer version Mao ZedongParty. No investor has any experience in that China, because there was no stock market in the Mao Zedong era. Therefore, what awaits them is a rude awakening.