PE and VC fund managers deserve sympathy at this time, having raised so much money recently only to be blindsided by Chinese policy shifts, as this Reuters article points out. But to continue throwing good money after bad is unconscionable. It would be far better to wait, watch and learn from what is going on at the moment in both Washington and Beijing.
Investing at this level in China has become next to impossible, if for no other reason than public exit strategies are likely to be held hostage by either or both of the US and Chinese governments as their trade war morphs into a financial war. Nevertheless, three strategies seem to have emerged as the consensus: 1) Invest in the government’s priorities; 2) Invest in domestic-focused firms; and 3) Brush up on Xi Jinping Thought.
Each begs rebuttal: 1) Investing in the Chinese government’s priorities is akin to investing in future victims of the US-China conflict; 2) Investing in domestic-focused firms is no assurance of avoiding US Entity Lists; and 3) Xi Jinping Thought is mass-market propaganda that is useless to read in isolation from the broader context of Chinese history.
Now is the time to keep the powder dry. There is further carnage ahead, believe it. This is especially for funds investing in the GBA from their offshore base in Hong Kong.
Continue reading PE, VC money should be in less of a hurry
Hong Kong’s securities regulator and stock exchange have announced changes to how they will combat backdoor listings, a tactic used by companies that might not otherwise qualify to list. The new rules will go into effect on October 1 and target changes in de facto control of listed companies or large-scale issuance of shares that result in such changes.
The amendments will expand the listings regime’s test for control and de facto control to include both changes in an issuer’s controlling shareholder as well as changes in the single largest shareholder able to exercise effective control.
The changes to Hong Kong’s listings rules come as HKEX seeks to shore up its reputation in the wake of a listings scandal and ongoing investigation into a top former employee for suspected corruption and misconduct in public office “in relation to the vetting of listing applications” of two listed companies. Read more on SCMP
Shenzhen’s high housing prices have been a major focus recently as the city is well aware of the need to attract and retain “talents”. The government has now released six measures to increase the supply of rental apartments and regulate the leasing market.
Basically, the government is encouraging landlords and/or leasing companies to join its leasing service platform. It is offering tax incentives to do so, such as VAT rebates.
Shenzhen is also working on supply, offering more public rentals. These account for 30% of newly-added commercial housing. Moreover, more land to build rental apartments are being assigned to industrial parks. Regulations to restrict the rental fees and combat illegal leasing have also been introduced.
Read more in Chinese.