Open 24/7/365

We Have A Life-Time Warranty /
Guarantee On All Products. (Includes Parts And Labor)

China Tells Inefficient Firms To Toughen Up Or Prepare To Fail

China is turning the screws on the nation’s companies as authorities seek to take advantage of the global pandemic to strengthen its industrial might. China Tells Inefficient Firms To Toughen Up Or Prepare To Fail

After letting inefficient firms survive for years, Beijing is now allowing them to fail. Bond defaults rose to a record $30 billion in 2020, including high-profile enterprises that had previously counted on the implicit guarantees of the state. Scrutiny and punishment of credit-rating agencies are increasing, while domestic exchanges delisted at least 16 stocks from their main boards last year — the most in data going back to 1999.

The trend is set to pick up in 2021 as China’s central bank tightens financial conditions, making it harder for both state-owned or private firms with inadequate cash flow to survive. An economic recovery and a strong currency are giving policy makers more room to focus on reducing the amount of debt in the financial system, which is at a record 277% of domestic output.

“The good thing is China will keep financial risks under control, but the bad thing is it won’t bail out firms unless they are in an extreme situation,” said Larry Hu, head of China economics at Macquarie Group Ltd. “The government wants to make the most of a solid growth recovery to tighten monetary policy. We may see more companies facing challenges in seeking cash.”

Beijing has in recent months rolled out more measures aimed at increasing the efficiency of the country’s capital markets, as well as the quality of its companies. In December alone, China tripled the maximum prison sentence for securities fraud to 15 years, proposed shortening the delisting process for unprofitable stocks and vowed to improve oversight of the country’s credit-rating industry. China also imposed a cap on bank lending to property developers, a sector that’s laden with debt.

In November, the top securities regulator pledged to enhance scrutiny of China’s initial public offerings, while an October crackdown on the convertible bond market — a financing tool largely favored by small-cap risky issuers — involved publishing 37 directives in a single day.

As China gets tougher on industry, its loosening of control over financial markets will allow investors — rather than the state — to punish poorly-run companies and reward growth. Concern over China Inc.’s reliance on U.S. markets for fundraising may have partly driven that action, as well as the Communist Party’s economic strategy of “dual circulation” that prioritizes strengthening domestic demand.

While the People’s Bank of China is unlikely to hike interest rates in the coming months, it has repeatedly signaled it will moderate the supply of cheap credit. The timing makes sense — booming export growth has given the central bank room to cut back on stimulus measures deployed during the coronavirus pandemic.

But the consequences for the most vulnerable companies can be brutal: Beijing’s commitment to normalize policy was a factor behind a sudden wave of corporate defaults at the end of last year, which in turn froze lending in the interbank market. The World Bank has also warned that excessive policy tightening could be damaging for the global economic recovery.

Funding China’s future growth engines without destablizing its highly-leveraged financial system requires a carefully calibrated rebalancing of the world’s second-largest economy. For China and its companies, a shift of that magnitude can only be successful if those with weak finances and poor returns are allowed to go bust, according to Carlos Casanova, an economist for Union Bancaire Privee.

“Authorities will continue to walk a tight rope between stabilizing growth and reducing economic fragilities,” Casanova wrote in a December note. “For China’s debt restructuring gambit to pan out as expected, the pace of financial reforms must accelerate rapidly.”

Updated: 5-2-2021

China Orders Tech Giants To Unbundle Financial Services

Companies have turned their mobile payment apps into financial supermarkets, offering loans and insurance policies. No more, says Beijing.

In recent years, China’s technology giants have turned consumers’ embrace of mobile payment apps into lucrative ecosystems offering a range of financial services, from personal loans to insurance policies.

Now, Beijing wants to put a stop to that.

On Thursday, China’s central bank and four other regulatory agencies told some of the country’s biggest financial technology firms—including WeChat operator Tencent Holdings Ltd., ride-hailing company Didi Chuxing Technology Co. and e-commerce firm Inc. —that their apps should no longer provide financial services beyond payments, according to people familiar with the discussions.

During the nearly three-hour-long meeting at the People’s Bank of China’s Financial Market Department, regulators told company representatives that the bundling of several financial services within a single platform obscured how much money was flowing into the various products, creating risks for the broader financial system, these people said.

Regulators’ push to delink the technology companies’ broader suites of financial products and services from their core payments platforms, if carried out, would deal a blow to a lucrative business model pioneered most successfully by Ant Group Co., the financial-services giant controlled by billionaire entrepreneur Jack Ma.

“In the past, payment was the end of all transactions, but now payment has become the beginning of all transactions,” Ant’s then-chief executive Simon Hu told Chinese media last year.

Since then, regulators—citing the systemic financial risks posed by Ant—have halted a planned initial public offering by the company and pressed it to reorganize itself as a financial institution, subject to oversight by China’s central bank.

Following the Thursday meeting with the People’s Bank of China, many of the country’s other major tech firms with financial-sector aspirations may be required to do the same.

During the meeting, the central bank, together with the country’s banking, insurance, securities and foreign-exchange regulators, ordered the 13 technology firms in attendance to bring their online lending and deposit-taking businesses in line with regulatory requirements, according to a statement published by the central bank.

It remains unclear, however, if they will also be required to delink nonfinancial services from their app-based ecosystems. Many of the platforms provide other services, such as ride-hailing or food delivery.

Ant Group and Tencent declined to comment. China’s central bank, Inc. and Didi Chuxing Technology Co. didn’t respond to requests for comment.

Ant’s Alipay mobile app, which started out as a basic payments platform, has branched out to provide other services to its more than one billion users. One of its most popular features has been its microloans service, accounting for nearly 40% of total sales in the first half of 2020, according to the company.

Ant is revamping Alipay to delink these financial services from its core payments service, two of the people said.

Ant is discussing with regulators the possibility of transferring some of its app-based financial services to another of its apps, called Ant Fortune, which has lain dormant for years—barely updated since the company decided to merge most of its functions into Alipay, the two people said.

Though it raised concerns among financial regulators, Ant’s microlending service supplies millions of individuals and small businesses with short-term loans that were otherwise hard to obtain through China’s traditional banking channels.

Under the arrangement, banks underwrote the debt, assumed the credit risks and collected the interest payments, while Ant pocketed a fee for facilitating the transactions.

As Ant’s pioneering efforts gained traction, they inspired mobile internet companies across Asia to adopt elements of Ant’s approach to financial services—attracting users with messaging or e-commerce services and then offering them a marketplace of wealth management and lending services.

South Korea’s Kakao Corp. , operator of that country’s ubiquitous KakaoTalk messenger app, introduced a service last year under its Kakao Pay mobile payment service that allows users to transfer their cash into a money-market fund. In 2017, Ant invested $200 million in Kakao Pay.

Whether for Ant or the other tech giants, the unbundling of the various financial services will almost certainly deal a blow to the companies’ future profitability and valuation.

“We expect the delinking of Ant’s payment and microloan business to weaken its competitive advantage of cross-selling through its Alipay platform,” Fitch Ratings said in a report last week. Together with other regulatory challenges, it added, the delinking “may moderate Ant’s revenue and profit growth in the near term.”

Updated: 6-7-2021

China’s Emerging Tech Firms Grapple With Losses

Meituan, Pinduoduo, Kuaishou spend heavily to spur new market segments.

The red ink is piling up at China’s emerging technology champions, as these companies spend heavily in a bid to spur new market segments.

Sales are soaring at companies such as food-delivery company Meituan, e-commerce group Pinduoduo Inc. and short-video specialist Kuaishou Technology, after the pandemic helped turbocharge demand for online services. At the same time, these companies are sustaining substantial losses as they prioritize long-term opportunities over immediate profitability—and their shares are sliding.

“We’ll stay patient for long-term results. We will not simply adjust our long-term-oriented strategy or investment pace based on short-term volatility,” Meituan Chief Executive Wang Xing said on the company’s earnings call May 28.

Revenue at the Hong Kong-listed company more than doubled in the first three months of this year compared with the same period in 2020, but losses rose even faster, to 4.8 billion yuan, equivalent to $750.7 million, or a loss of more than 13 cents for every dollar the company took in.

Many American tech companies, from Inc. to newer businesses like DoorDash Inc., have used a similar playbook of spending heavily to grow new businesses. Chinese tech companies—including both publicly traded ones and unlisted startups such as ride-hailing giant Didi Chuxing Technology Co.—often try to outspend rivals, subsidizing their offerings in pursuit of market dominance.

Still, investors are signaling some impatience. The stock prices for Meituan and Pinduoduo are down more than 30% from their highs earlier in the year, while Kuaishou has fallen 50%, all worse than their more established rivals such as Tencent Holdings Ltd. and Alibaba Group Holding Ltd. Tech stocks have been under pressure in China for several reasons in recent weeks, including a shift in investor focus to old-economy businesses, rising interest rates and the government’s clampdown on the sector.

Representatives from Meituan, Pinduoduo and Kuaishou said they have no further comments beyond executives’ remarks at their respective earnings calls, but analysts expect the companies to remain firmly focused on growth. “They will keep expanding, using the operating data to show aggressive growth, and then investors will continue to finance them,” said Ming Lu, head of Chinese equities at Aequitas Research in Shanghai.

Related Articles:

Nigerian Stocks Head For Best Annual Run Since 2013

The Goldman Sach’s Solution Could Work Out Fine For Alibaba’s Jack Ma

Investors Double Down On Stocks, Pushing Margin Debt To Record

Trump Signs Virus Relief Bill After Deriding $600 Checks

How The Central Bank Collapse Will Likely Play Out #GotBitcoin

Housing Boom Brings A Shortage Of Land To Build New Homes

Africa’s Richest Man Initiates Nigeria’s First Share Buyback

No Matter What Congress Does, 12 Million Jobless Americans Will Temporarily Lose Unemployment Benefits

Mar-a-Lago Neighbors Tell Trump That They Don’t Want Him To Live There

Trump Strutted Like A Player, Then He Got Played

Meet The Electoral College, America’s Most Important Voters

Supreme Court Rejects Texas Challenge To Biden’s Victory In Presidential Election

Unsold US Hotel Rooms Near 1 Billion As Lodging Crisis Deepens

Hunter Biden Says His Taxes Are Under Investigation

Lawyers Across The Country Urge Bar Associations To Investigate Trump’s Legal Team

Did Rudy Giuliani Fart Twice At A Michigan Election Fraud Hearing?

‘Jim Crow’ Land Ownership Spurs Black Farmers’ Appeals To Biden

Can President Trump Pardon Himself And His Family?

Historians Sue To Force Trump Administration To Preserve Records

Bribes For Presidential Pardons Scheme Investigated by DOJ

Why Withholding Evidence Until They (Giuliani/Trump) Gets To The Supreme Court Is A Stupid Idea

Pro-Trump Group Donor Sues Administration Over Failure To Expose Election Fraud

Giuliani Drops Sidney Powell As Trump ‘Strike Force’ Splits

Joe Biden The Oldest President Ever Will Help Young Americans Confront A Generational Wealth Gap

Biden Asks For Donations To Fund Transition

Governor Cuomo Gets Emmy For ‘Leadership’ During Pandemic. Trump Gets Nada, Zip, Bumpkis, Zelch!!

Fed To Return Lending-Backstop Funds To Treasury As Requested #GotBitcoin

Thriving New York Times, Fox News Ponder A Post-Trump Scenario

Trump Unveils ‘Platinum Plan’ For Black Americans (BS!!!) #GotBitcoin

The Record Economic Boom Is A Mirage! Just More Trump BS! Keep Moving #GotBitcoin

US States Face Biggest Cash Crisis Since The Great Depression (#GotBitcoin?)

Factory Jobs Still Head Offshore Despite Trump Promises Including Commerce Secretary’s Auto Parts Company

Trump Issues Executive Order Making Some Civil Servants Easier To Hire And Fire

Black Homeowners Pay $13,464 More On Their Mortgages, Study Says

Trump Weighs Prospect Of Defeat After Insulting Both Seniors AND Women

Wealthy Nations Defy Trump With Debt Lifeline To Ailing Cuba

Who Is Helmut Norpoth And Why Does He Say Trump Will Win Big?

Companies Raise Inability-To-Pay Claims Amid Pandemic, Justice Department Official Says

Homeland Security To Grant Millions To Groups To Combat White Supremacists And Other Extremists

Prediction (Betting) Market Doubts Trump Will Complete First Term After COVID-19 Diagnosis

Trump Used Facebook To Try And Convince 3.5 Million Black Americans Not To Vote In 2016

Trump’s Tax Revelation Destroys Successful Business Mogul Image

Cost Of Racism: U.S. Economy Lost $16 Trillion Because Of Discrimination, Bank Says

Bloomberg, Others Rack Up $20M To Register 32K Florida Felons Deeming Them “Time Served”

Some Wealthy Americans Are Already Prepping Their Finances For A Joe Biden Presidency — Here’s How

Kamala Harris Woos Black And Latino Voters As Joe Biden’s Running Mate

Biden Appeals To Florida Latinos As Polls Show Trump Gaining

Poll: Should Trump As A Civilian Face Class-Action Lawsuits For Minimizing Severity Of Covid19?

Trump As A Civilian To Face Avalanche Of Lawsuits!!!!

Trumponomics Forces Amazon Drivers To Hang Cellphones From Trees Desperate To Get Gigs

Trump Is Silent While Russian Navy Conducts Biggest Drills Near Alaska Since Soviet Era

Open Letter To Supporters of The Draft-Dodger-In-Chief!

Right-Wing Facebook MEGA-Troll Wall-Of-Shame

Donald Law And Order Trump Encourages People In North Carolina To Vote Twice, Which Is Illegal

Here’s Why No Bankers Go To Jail (#GotBitcoin?)

Cities With Republican Mayors Also Had Protests Which Resulted In Property Damage

Trumponomic’s Furloughs Turn Into Permanent Job Losses (#GotBitcoin?)

Trump White House Commits Multiple Hatch Act Violations In Re-Election Attempt

After Three Years of Attacking L.G.B.T.Q. Rights, Trump Suddenly Tries Outreach

Scrapping Payroll Tax Without Replacement Would Hit Social Security Benefits By 2021 (#GotBitcoin?)

Boomers And Millennials Facing The Effects Of Trumponomics While Still Recovering From Last Recession

Money Funds Waive Charges to Keep Yields From Falling Below Zero (#Bitcoin?)

Millions of US Jobs To Be Lost For Years, IRS Projections Show (#GotBitcoin?)

Kellyanne Conway To Leave White House As Trump Divisiveness Indeed Hits Close To Home

The US National Debt Has Exceeded The Total Value Of The GDP (#GotBitcoin?)

When The Stock Market And Economy Becomes Disconnected (#Bitcoin?)

Donald Trump, Peter Navarro (Trade Adviser) And A $765 Million Loan To Kodak That Deal Blew Up

Steve Bannon Joins Six Other Criminally Charged Ex-Trump Advisers

Trump Calls For Goodyear Boycott Amid Outrage Over ‘MAGA’ Ban

Trump’s Big Donors From 2016 Want Nothing To Do With Him This Year

State Budgets Hit Hard By Trumponomics Create A Drag On U.S. Recovery

Joe Biden-Kamala Harris Ticket Makes Debut After Historic VP Pick

Biden, Obama Release Campaign Video Applauding Their Achievements

Small Businesses Brace For Prolonged Crisis, Short On Cash And Customers (#GotBitcoin?)

Ultimate Resource For Violations of The U.S. Constitution Including “Money” And Coronavirus

Trump Campaign Forced To Use Tele-Rallies As Coronavirus Cases Surge

Roger Stone Uses Racial Slur In Live Radio Interview With Black Host

The Fed Is Setting The Stage For Hyper-Inflation Of The Dollar (#GotBitcoin?)

The Next Phase Of The Retail Apocalypse: Stores Reborn As E-Commerce Warehouses

Famous Economist Mohamed El-Erian Warns Investors To Stay Away From Zombie Companies And Zombie Markets

Republicans Alarmed By Democratic Senate Hopefuls’ Fundraising Haul

American Airlines Plans To Furlough Up To 25,000 Workers This Fall (#GotBitcoin?)

Consumer Appetite For Cars, Homes Bolsters U.S. Economy

Banks Get Ready For Wave of Recession-Led Loan Defaults (#GotBitcoin?)

32% of U.S. Households Missed Their July Housing Payments

What You Need To Know About The New Small-Business Bankruptcy Laws

Police Wrestle With Surge In Crime In U.S. Cities Amid Defunding Efforts

Here’s An Investment That Perfectly Tracks The Economy

Fed, Treasury Disagreements Slowed Start of Main Street Lending Program

When A Texas Oil Boom Goes Busts

Trump Takes Cognitive Test And Can Identify A Rhino vs A Camel

Don’t Know How Much Stimulus Is Needed? Put It On Autopilot, Some Say

Colorado Police Chief Fires Three Officers Over Reenacted Chokehold Placed On Elijah Mcclain

Republicans Give Trump Labor Day Deadline To Turn Things Around. After That, He’s On His Own

Chapter 11 Business Bankruptcies Rose 26% In First Half of 2020

Chaotic Trump Administration Plus Russian Bounty Intelligence Equals Loss Of American Lives

Supreme Court Orders Restructuring of Consumer-Finance Watchdog

Reddit, Acting Against Hate Speech, Bans ‘The_Donald’ Subreddit

Class Action Lawsuit Alleges Visa Subsidiary Violated Privacy And Data Protections Of Venmo, Stripe, Square’s Cash App, Robinhood & More

Private Equity’s Trillion-Dollar Piggy Bank Holds Little For Struggling Companies (#GotBitcoin?)

TikTok Teens Overload Trump’s Online Store With Orders Only To Abandon Shopping Cart

Bill Gates Says Trump’s Lack Of Leadership Is Making Pandemic Picture ‘More Bleak Than I Would Have Expected’

Fed Stress Test Finds U.S. Banks Not Healthy Enough To Withstand “Few Quarters” Economic Downturn

Elizabeth Warren Was Right About Whacky Stockmarket Fundamentals (#GotBitcoin?)

Two Of The Latest High-Profile Trump Resignations

US Banks Have Seen A Record $2 Trillion Surge Of Deposits Since The Coronavirus Crisis Began

Our Facebook Page

Your Questions And Comments Are Greatly Appreciated.

Monty H. & Carolyn A.

Go back

Leave a Reply