Insightful comment on China investing

[Lsbcal]

NOTE: This thread is about the wisdom of investing money in China and NOT about the politics of that country. China makes up 11% of one international index fund (VFWAX from Vanguard) so this is relevant to many investors.

This video CNBC interview with Kyle Bass was an eye opener for me:
https://www.cnbc.com/video/2021/07/27/what-investors-need-to-know-about-chinas-business-crackdown.html

Why is China cracking down on it's stock sector? The short answer appears to be that it's all about the way politicians want to create more harmony and avoid social unrest in a country with 1400 million people. Bass mentions that there is a "China middle class" which is 400 million and a lower class of 1000 million. Huge numbers. The way China tries to manage this seems inconsistent with capitalist investing. It may be that the current virus situation in that country has impacted the lower classes more.

It appears that investing in China is fraught with danger. Lack of audits, etc. Many US asset managers starting to pull out of China.

 

[Running_Man]

2 trillion in US Listings and they are talking about delisting all of them or in words of article:


https://www.ft.com/content/299ba00b-dfef-4c53-88a2-e6725d14025d

He added that the heads of big Chinese tech groups listed in the US could face serious consequences if they resisted any drive to delist. “I would be very worried if I was a Chinese internet baron that I could find myself in a cell.

 

[Lsbcal]

Running_Man, that article is apparently behind a paywall.

 

[Running_Man]

well that was too bad it was not earlier in day, basically the article detailed how China was ordering it's companies to stop listing in USA and had no intention of allowing audited figures to be provided to US authorities.

 

[Starsky]

Chinese business and politics are inseparable. They are attempting to reconcile two competing economic systems that don't fit together. There will naturally be consequences; and incompatibilities between American and Chinese audit standards are one predictable condition that disqualifies Chinese companies from participation in our more transparent financial system. These business differences that China is defending are for party purposes since the CCP ultimately owns everything in China, and the numbers that these companies report are as suspicious as everything else the CCP proffers.

 

[ER_Hopeful]

NOTE: This thread is about the wisdom of investing money in China and NOT about the politics of that country. .

As an immigrant from Communist China, I can tell you that's a very big blind spot right there, i.e., trying to separate politics from business in China. They dont operate like in the U.S. Big Businesses can go nowhere without connections to big powerful Committee officials, mostly the Xi clan or the Jiang clan. Xi=Xi Jin Ping, Jian=Jiang Zhe Ming (Xi's number one political enemy, he wanted Xi destroyed before he became too powerful but ultimately failed.)



Businesses in China number one priority is buying political connections, not innovations, quality control, responsibility to shareholders, etc.


Jack Ma of Alibaba, Ren Zhen Fei of Huawei are loyal CCP members, BTW.

 

[Chuckanut]

A
Jack Ma of Alibaba, Ren Zhen Fei of Huawei are loyal CCP members, BTW.

IIRC, Mr. Ma recently got taken out to the Chinese version of a woodshed.

I really can't imagine China becoming the world's #1 economic power while under the thumb of the CCP. Unless, of course, the current #1 messes up very badly and shoots itself in the foot. Actually, both feet. And maybe the chest.

If I was somebody like Tim Cook, I would be very quietly moving more and more of my production to other countries. Especially countries not run by authoritarian regimes. And I would make data security a huge #1 priority.

 

[CardsFan]

As an immigrant from Communist China, I can tell you that's a very big blind spot right there, i.e., trying to separate politics from business in China. They dont operate like in the U.S. Big Businesses can go nowhere without connections to big powerful Committee officials, mostly the Xi clan or the Jiang clan. Xi=Xi Jin Ping, Jian=Jiang Zhe Ming (Xi's number one political enemy, he wanted Xi destroyed before he became too powerful but ultimately failed.)



Businesses in China number one priority is buying political connections, not innovations, quality control, responsibility to shareholders, etc.


Jack Ma of Alibaba, Ren Zhen Fei of Huawei are loyal CCP members, BTW.

Thank you for the insightful post. My experience doing business in China is similar.

We had a local office. Due to the size it was required to have a committee of CCP members. They did not technically run the show (though the head of the office was one of the CCP members), but they reported back to "the Party" anything and everything "the Party" wanted to know.

BTW, this was no secret. They we very open and proud of their membership in the party and the responsibilities they had to it.

 

[Lsbcal]

So just to remind folks here, this thread is about the wisdom of investing in China. Maybe some should consider the long term consequences especially in regard to funds that have significant stakes in China. As a retiree I don't really want that risk long term although if I could see a way I might consider it a trade idea.

Actually I wonder about any funds in countries like Brazil, Russia, etc. My own preference is for an international small cap fund like VINEX (Vanguard International Explorer fund) although I do not own it at present.

BTW, I do totally sympathize with the political comments above (and find them fascinating ) and sometimes it is unfortunate that the ER forum discourages this.