China’s equity disconnect


On Tuesday, China’s state council announced to great fanfare a plan that would make it easier for investors outside China to buy and sell stocks traded on the mainland’s second-largest equity board, the Shenzhen Stock Exchange.

In Hong Kong, Charles Li, CEO of Hong Kong Exchange and Clearing Ltd., said the program, dubbed the Shenzhen-Hong Kong Stock Connect, could be up and running before Christmas. The Shenzhen link will be modeled on the Hong Kong-Shanghai Connect, a parallel program launched November 2014 to increase trade between Hong Kong and the Shanghai Stock Exchange.

This ought to be big news. China’s $11 trillion economy is the world’s second-largest, and home to lots of capital and some of the world’s biggest companies. China claims the world’s largest population of billionaires (568 in China compared to 535 in the United States). Chinese companies account for more than 100 of the Fortune Global 500. The market capitalization of the mainland’s two exchanges, Shanghai and Shenzhen, is roughly equal to that of Tokyo and Hong Kong respectively.

And yet the grand vision of “connecting” China’s capital and companies with the rest of the world brought no joy to markets this week. Stock prices in Shanghai and Shenzhen  barely budged today. Among global investors, the responses have been slightly less charitable than reviews of Suicide Squad on Rotten Tomatoes.

What’s the problem? Continue reading “China’s equity disconnect”

Beijing’s cyber-protectionism

An extraordinary coalition of business federations from the United States, Europe and Japan teamed up this week to send Beijing a message: back off of proposed cyber-security regulations that would force foreign firms to store data in China and surrender information and technology to Chinese security inspectors.

The business groups, which included the US Chamber of Commerce, BusinessEurope and Japan’s Keidanren, decried the new rules in a letter sent to Chinese premier Li Keqiang. Other signatories included more than 40 global industry groups representing financial services, technology and manufacturing sectors, and business lobbies from Australia, Mexico and Switzerland.

The petition was a response to draft regulations, announced by the China Insurance Regulatory Commission last month, requiring foreign insurers to use Chinese hardware and software to store and encrypt data. But global firms also are fuming over new banking regulations that would require them to hand over key technologies such as source codes and encryption algorithms to the Chinese government. (Beijing has delayed implementing those rules after protest from Washington.)

China insists it needs tighter controls on cyber-security and the Internet to guard against terrorism. Global companies aren’t buying it. The letter casts the regulations as thinly disguised protectionism and warns they will further isolate China from the global digital economy. The new provisions would “have no additional security benefits but would impede economic growth and create barriers to entry for both foreign and Chinese companies,” the letter declares. Continue reading “Beijing’s cyber-protectionism”

Barbarians shown the gate

When Uber Technology chief executive Travis Kalanick announced earlier this week that Uber will sell its China operations to arch-rival Didi Chuxing Technology Co he joined a long line of global tech titans forced to retreat from China.

Yahoo surrendered China operations to Alibaba in 2005. EBay withdrew from China in 2006. Facebook and Twitter have been banned since 2009. Google shut down its China search engine in 2010. Instagram and Snapchat have been blocked since 2014.

Uber’s exit provides the starkest evidence to date that China—the world’s second largest economy and No 1 market for ride-hailing— is off-limits to non-Chinese technology firms. Continue reading “Barbarians shown the gate”