19: The Fraud Industry, Why China is Going After its Tech Giants, Japan Uses the T-Word, Noah Smith on Cold War 2, Xi Jinping's World, Phases of the Moon
In doing what we ought we deserve no praise, because it is our duty - Saint Augustine
Investing & Business
The Fraud Industry
Reading time: ~10 minutes
Great series on the Glenn Chan blog about frauds and especially in the public markets. (Part 2 and Part 3)
Questions answered in the series include:
Stock promotion tactics used in Pumps and Dumps Schemes
Marketing/copywriting clichés
Money Laundering Tactics 101
The current wave of China frauds have much higher market caps and became public through the IPO (initial public offering) route rather than the reverse merger route. They tend to be much bigger and often have liquid options markets because of their size. Because the implied volatility on some of those options is low, it may be worthwhile to bet against these stocks.
Why China Is Going After Its Tech Giants
Reading time: ~10 minutes
Very interesting article by ChinaFile on the current wave of regulations/crackdowns affecting Chinese Tech companies, and the several motive behind those moves.
If you need a quick refresher on the different companies that have experienced the power of the government lately:
On July 4, the country’s Internet regulator ordered the removal of its mobile app from Chinese app stores. This came two days after the same regulator opened an investigation into the company, suspending it from adding new users. […] Other Chinese Internet giants, including Meituan, Tencent, JD.com, Bytedance, and Alibaba have faced government regulatory investigations and even been slapped with hefty fines. Most notably, of course, Ant Financial saw its mega IPO in Hong Kong and Shanghai halted by the Chinese government.
What happens is even more suprising considering that there was a 180 degree turn compared to even a year ago, when the US were trying to put the brakes on the wave of listings of Chinese tech companies on US markets!
What’s the message here?
#1 The governement wants to make it crystal clear that unlike in the US where Big Tech can dictate the rules, in China the governement is still the boss
China’s leaders, however, care only about maintaining control over these firms and all their data. This is reflected in the recent passage in June of a national data security law in China that dictates how data is collected and utilized. […] The first message sent by the recent investigations should be understood as targeted toward an audience of Chinese global Internet firms—essentially making sure they know who’s boss.
#2 “The feast has come to an end”
The current wave of regulatory actions are intended to send are targeted at a second audience: Chinese citizens. For them, the message echoes the one often referenced after the Ant Group IPO fiasco, namely that Deng Xiaoping’s era of “let some people get rich first” has come to an end. […] The choice for the Party at a time when it needs to consolidate the highest level of support for its rule is clear: feed the frenzy of populism against the rich. This is consistent with Xi Jinping’s repeated emphasis on the need to “struggle.”
Emphasis as in using the word “struggle” 60 times in a speech 👀
#3 Locking the tech ecosystem is no problem for China, while the USA are left with difficult regulatory changes to be implemented
To China, there is little cost to its own tech industry and its innovation strategy, which was always controlled and manipulated by government policies. A heavier-handed approach to the U.S. tech industry could bring much bigger consequences and disruptions to innovation than those tactics do for Chinese firms.
Thought-provoking stuff…
Japan uses the T-Word
Reading time: ~10 minutes
The recently publised Japanese annual defense white paper is for the first time emphasizing on the necessity to stabilize the situation regarding Taiwan in order to maintain peace in the region:
Stabilizing the situation surrounding Taiwan is important for Japan’s security and the stability of the international community,” the white paper states. “Therefore, it is necessary that we pay close attention to the situation with a sense of crisis more than ever before.”
“The US Didn’t Start Cold War 2” by Noah Smith
Reading time: ~10 minutes
Another great article by Noah Smith on the subject of the US-China relations. It also has some great insights on broader topics related to China!
Under Jiang Zemin and Hu Jintao, China was still authoritarian but was far from the totalitarian nightmare it had been under Mao. But with the ascension of Xi Jinping, China has now moved decisively away from that modest two-decade relaxation. It’s not returning to a Mao-like regime, but it is becoming totalitarian in many ways. The surveillance state it has built in Xinjiang is something out of a dystopian science-fiction novel (in fact, China’s most famous sci-fi author is apparently consulting on the project)
I think this part resonates a lot with the book review that I have shared in issue #18 on How Asia Works.
On China’s priorities:
It is clear that for China, economic growth — and its own military power — take absolute precedence over addressing global warming. Cost reductions in solar and batteries will eventually persuade China to switch to green energy out of pure economic self-interest, but no amount of wheedling, cajoling, flattery, or “moral leadership” by the United States is likely to change its self-interested calculus one iota.
Some useful elements to understand the Chinese national narrative over time:
The U.S.’ unilateral opening to Chinese-made goods, and tolerance of China’s mercantilism, was essentially a reversal of the “unequal treaties” forced on China by European powers a century earlier. The status quo in Asia is not one of American imperial domination, but of regional flourishing.
Arts & History
Xi Jinping’s World
Watching time: 90 minutes
A great documentary released recently on the Chinese national narrative, and on the man himself.
Never before has China been so powerful, ambitious, and authoritary. Never before has China toppled the world order. Who’s Xi Jinping, where is he coming from? And what’s exactly the world that he’s building in front of us?
Treat for the Ears
Other Interesting Links
The Science of Hitting on Five Below ($FIVE)
Until next week!
Antoine