Did Canadian pension funds anticipate the Chinese crackdown on big technology?

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Posted on 04/08/2021


In 2020, the MSCI China index returned 29.67% compared to 23.66% in 2019. In late July and early August 2021, the market value of Chinese stocks declined, as the Chinese Communist Party (CCP) marked its centenary with a harsh speech in Beijing. by Chinese President Xi Jinping. After years of “lax” regulation, President Xi has ruled over major Chinese tech companies, banks and education tutoring companies in an effort to reduce inequalities and demonstrate to the world that the government has ultimate control. . The first signs of the Chinese government’s power over the private sector were catalyzed by the proliferation of Chinese insurance companies and lenders betting big overseas. The fall of Anbang Insurance was a major step in the withdrawal of China’s consistent adherence to capitalism.

“The Chinese people have never intimidated, oppressed or enslaved the peoples of other countries, not in the past, not now, or in the future,” Xi Jinping said in a speech on July 1, 2021 at the ceremony. marking the centenary of the ruling Communist Party in Beijing, China (translated).

“At the same time, the Chinese people will never allow foreign forces to intimidate, oppress or enslave us,” he added. “Whoever harbors illusions of doing this will break his head and spill blood on the Great Wall of steel built from the flesh and blood of 1.4 billion Chinese.”

Unlike former US President Donald Trump who constantly complained about American big tech after they censored it and his political supporters, Xi Jinping cracked down on Chinese big tech, starting with Jack Ma’s Ant Financial , limiting its scope and potential market power. On August 4, 2021, on CNBC’s Squawk Box show, former US trade advisor Peter Navarro said, “President Xi Jinping might have taken a look at what Google, Facebook and Twitter have made to Donald J. Trump with their political power and decided that the big tech in China is not going to get that big.

Navarro adds that the Chinese crackdown on its companies is “one of the biggest victims is American pension funds.”

The Chinese stock exchange is already the second in the world. Many U.S. and Canadian public pension plans have increased their allocation to Chinese equities since 2015, both in the public and private markets. Canadian pension plans have gone full steam ahead in companies like Tencent Holdings Limited and Ant Financial, the financial services spin-off company of Alibaba Group Holding Limited. Canadian pension plans viewed China’s promise as a potential source of long-term capital appreciation and income for its retirees. Part of the Canada Pension Plan Investment Board’s 2025 plan in 2019 was to invest up to a third of its fund assets in markets like China, India and Latin America. According to the SWFI Transaction Database, Canadian public plans directly invested US $ 4.927 billion in Chinese assets in 2018, US $ 2.62 billion in 2019 and US $ 4.85 billion in 2020. These figures exclude commitments of funds and investments based in Hong Kong. . For mainland Chinese stocks, liquidity is fueling much of the recent action in the stock market in China, where retail silver favors some stocks. Margin financing fueled a bubble in Chinese stock markets in 2015, as well as support from Chinese financial institutions. However, the regulatory crackdown on Chinese companies is causing stock prices to fall.

Beijing’s tighter financial regulations
Seemingly untouchable Alibaba founder Jack Ma encountered government backlash after a speech he criticized government regulators for being incompetent and late. This speech took place just before Ant Financial (now Ant Group) went public. Jack Ma violated a major informal rule in New China. You can become rich and famous, but you cannot criticize the CCP harshly. Later, Chinese regulators proved their worth in forcing tougher changes on Ant Group, while Jack Ma “hid” from the media. Ant Group was impacted by Chinese regulations, with profit falling to US $ 2.1 billion in the March 2021 quarter from a previous period. The regulatory assault also had an impact on Tencent Holdings. Tencent has pledged to further limit play time for Chinese minors and ban in-game purchases for younger players.

Have I got
The Didi ridesharing app is very popular in China, crushing Uber in the country in terms of market share. Didi Global was supposed to be one of the hottest initial public offerings of 2021. Two days after its initial public offering in the United States and raising more than US $ 4 billion, Chinese government regulators announced an execution radical against Didi Global. These regulators alleged that Didi used – or potentially misused – customer data. The sheer timing of coercive action, followed by an order from the Cyberspace Administration of China directing Chinese app stores to remove Didi until the issues were resolved, sent the price plunging. action of Didi. In August 2021, government authorities ordered 25 more apps operated by Didi to be removed from app stores.


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