[throwaway4good]

"Shares in Tencent plunged 9.0% in Hong Kong on Tuesday amid widespread market jitters over Chinese regulatory crackdowns on high-growth sectors, including online platforms and, most recently, private tutoring. Hong Kong's benchmark Hang Seng Index (.HSI) fell 4.2%."

Fascinating how the Chinese authorities seem to be regulating the these companies with complete disregard on how the stock market might react.

[paganel]

> with complete disregard on how the stock market might react.

I personally regard this as a positive fact, and I'm generally against the policies of the current Chinese authorities. The stock market should not be the be-all and end-all of our modern society.

[aerosmile]

Does it make sense to have strong principles and not be guided by financial incentives alone? Sure. But would it make more sense to have a solid regulatory framework to start with, as opposed to being loosey goosey for a very long time and then course correcting in a way that evaporates billions in value overnight from domestic and foreign investors?

Countries and companies have a lot in common. Consider this analogy: would you want to join a company that has an excellent business model and is poised for strong growth, but the CEO is a nut case and has done several mass layoffs that have completely blindsided internal and external people?

I, for one, am happy that China is tripping over itself and will give us a bit more room to breathe and figure out our own mess, so that when the inevitable takeover of Taiwan and all the other shit storms happen in the future, we'll be at least a tiny bit more prepared.

[sudosysgen]

It's not possible to have a solid regulatory framework from the beginning. You can't predict the advance of cutting edge tech. Sure, you can do it earlier, but never from the start.

Also, billions of dollars of value didn't disappear overnight. No jobs are or will be lost, and very little utility is lost, except being able to sign up for 1-2 weeks.

I'm not absolutely thrilled by the rise of China either, but we gotta stop lying to ourselves. Not every single action by the Chinese government is a stupid and reckless calamity that will cause untold harm. We're often blind to the good and to the utility of these decisions, and on the balance a government that's not scared of the stock market is going to be more effective assuming they're competent to begin with.

[throwaway4good]

It is worth noting that SMIC, the main Chinese semiconductor fab is up considerably on a day where the rest of market crashes:

https://finance.yahoo.com/quote/0981.HK?p=0981.HK&.tsrc=fin-...

Possibly reflecting China's (new) policy to focus on what it considers "hard tech", instead of social media, fintech, e-commerce.

[aerosmile]

> No jobs are or will be lost, and very little utility is lost, except being able to sign up for 1-2 weeks.

Contrast that with the quote from the article:

"Shares in Tencent plunged 9.0% in Hong Kong on Tuesday amid widespread market jitters over Chinese regulatory crackdowns on high-growth sectors, including online platforms and, most recently, private tutoring. Hong Kong's benchmark Hang Seng Index (.HSI) fell 4.2%."

The stock price may not correlate with short-term budgets, but it absolutely has an impact on long-term budgets. So what the investors will be asking themselves now is: "Is this disruption just a short blip on the radar, or did we just witness a long-term change of the Big Tech landscape in China?" Getting on the shit list of the Chinese government sounds like a long-term problem to me.

[thaumasiotes]

> Contrast that with the quote from the article:

Shortly after the quote you pulled:

>> Beijing-based tech consultant Zhou Zhanggui said investors were over-reacting

Zhou Zhanggui is right. Suspension of account creation has basically no impact unless it fails to come back in August as advertised.

[sudosysgen]

Tencent is not a cash starved company, and these stocks will recover at least mostly if not fully.

[blueblisters]

> I, for one, am happy that China is tripping over itself and will give us a bit more room to breathe and figure out our own mess, so that when the inevitable takeover of Taiwan and all the other shit storms happen in the future, we'll be at least a tiny bit more prepared.

A China with a stable regulatory regime is probably preferable over a China that is prepared to do short-term self-harm in return for its long-term strategy objectives. This just reinforces that there is no transparency in policy-making, and there is no room for capital to act as a tempering voice. Moreover, Taiwan's economy is heavily linked to China - China is Taiwan's biggest trading partner. If China has no regard for domestic or foreign capital and industry, it almost certainly doesn't care about disrupting Taiwan economically and forcing it to submission without firing a bullet.

OT: I see a lot of Chinese experts rationalize recent moves by saying it's all foreshadowed in CCP's public policy goals and so on. If that was the case, I would expect at least domestic investors to have priced-in the impact of the recent changes well ahead of time.

[yorwba]

> I see a lot of Chinese experts rationalize recent moves by saying it's all foreshadowed in CCP's public policy goals and so on. If that was the case, I would expect at least domestic investors to have priced-in the impact of the recent changes well ahead of time.

That's assuming domestic investors were paying attention to public policy goals (probably not true for many small-time speculators) and able to predict which companies would run afoul of regulations (hard even for well-informed institutional investors). The second draft of the new personal information protection law has penalties up to 5% of revenue in severe cases https://www.cods.org.cn/c/2021-06-24/14270.html (Article 65) but once such a fine is issued for the first time (assuming this part makes it into the final law) I bet the company in question will have its stock price tank, even though the possibility of regulatory action is public knowledge. The hard part is knowing if and when it'll happen.

[lmm]

The notion of designing a stable regulatory regime upfront is a mirage. It's how you get these giant corporations that pay no tax thanks to their double Irishes and have "independent contractors" instead of employees so they can avoid paying their social responsibilities.

The legal/regulatory regime should be reasonable and predictable, but that should mean human judgement rather than blindly following coded rules like a smart contract. If you're a corporation that's large enough to be impacting society, you should expect society to have a say in what you're doing, and that means that as you do new and surprising things, there will be corresponding regulatory changes.

[birdyrooster]

All we can do now is hope the Taiwanese don't ratify their constitution to get rid of their claims to mainland China. If they can manage to stay the course, the US will remain unentangled with Taiwan's fate.

[birdyrooster]

Amend*

[fighterpilot]

It's bad because the "stock market" that people focus on are typically indices of only the largest companies, such as the S&P 500 and Nasdaq. If the concern is around performance of these particular indices, it can lead to more policies that favor large business at the expense of the small.

[ffggvv]

very large percentages of the country have stock portfolios, at the very least via a company 401k.

when stocks are up they feel richer and spend more money at stores etc.. (the wealth effect)

whether or not you agree with this approach, the fed and congress care alot about the stock market for good reason.

i just wish it wasn’t all they cared about

[CamperBob2]

The stock market should not be the be-all and end-all of our modern society.

And a repressive Communist government should be?

[mc32]

Naively, it looks like the CCP sees the influence and heft US tech exercises on the US population and world at large.

The CCP will forgo economic might (in this sector) for social stability and control every time. They do not want these titans to have more power or influence than they have so they rein them in and let them know who holds the straps.

[vehemenz]

The problem is that the CCP has nothing to replace this cultural vacuum with. They want to legislate a return to "old" (post 1949) values by banning foreign tutors, suppressing dissent on WeChat and Weibo, and doing generally authoritarian shit to encourage nationalism. Meanwhile, young, educated people almost exclusively consume the cultural products of the West, Korea, and Japan. And they find the North Korean style propaganda embarrassing. The disconnect really cannot be understated.

[georgeecollins]

>> The problem is that the CCP has nothing to replace this cultural vacuum with.

I am no expert, but I disagree and I think this is the kind of thinking that has failed the west for the last thirty years. I think the idea started with the fall of the Soviet Union. That culture and ideology was bankrupt. So a lot of western people thought that when there was a free exchange of ideas with China, the Chinese would eventually reject the CCP.

My experience of people in China-- admittedly a long time ago-- was they are generally very patriotic or nationalistic, like Americans. They appreciate the CCP and what it has accomplished. They have a strong domestic arts industry making movies, books, games. Sure lots of people disagree with the party, but that doesn't that they want a western liberal democracy. So lots of people will speak in favor of a benevolent elite and against populism or what they see as western chaos or oppression. When people are against the government, they aren't wishing for a different government system, just less corrupt or more benevolent authoritarians.

Anyway, that is the way I am thinking about these days. But I could be very wrong and I would love to hear from people who are from or spend time in China.

[tablespoon]

I think you're broadly correct. With regard to China, a lot of people's understanding is driven in large part by wishful thinking, which is a serious weakness and vulnerability.

> Sure lots of people disagree with the party, but that doesn't that they want a western liberal democracy. So lots of people will speak in favor of a benevolent elite and against populism or what they see as western chaos or oppression. When people are against the government, they aren't wishing for a different government system, just less corrupt or more benevolent authoritarians.

I think it's important to note those views are in large part created an reinforced a deliberate propaganda program. For instance, I believe one of the ideas the Chinese government pushes is the Chinese people "aren't ready" for democracy (while carefully preventing anything that could make them ready). When educated Chinese people were better exposed to ideas about liberal democracy, they were very clear that they wanted it (e.g. 80s leading up to Tiananmen Square, the Liberal Studies curriculum in Hong Kong), but the government has learned from those episodes and has taken action to get the ideological results it desires.

[dillondoyle]

+1. When you take what you're saying with the parent above you, Xi is also pulling all the state media strings to play up the less-corrupt benevolence thing - using it to consolidate power. Check out this recent good article about their extrajudicial 'repatriations' which has examples of the bragging in their government controlled media about it (kidnappings).

It's both trying to show less corruption and simultaneously scaring everyone away from dissent. Gross but seems powerful.

https://www.propublica.org/article/operation-fox-hunt-how-ch...

[jjaammee]

That's maybe true when young people in China first learned western democracy ideas. Nowadays I think most of educated Chinese believe democracy is not suitable for China. They didn't get the whole picture of western world, but who does nowadays. They see signs of culture revolution in western social movements and rejected those wholeheartedly.

[tablespoon]

> Nowadays I think most of educated Chinese believe democracy is not suitable for China.

Isn't that exactly 1) what the Communist Party wants them to think, and 2) an idea that they can manipulate the information environment to promote?

[em500]

Assume for the moment that you're American, liberal, white collar and live in one of the more affluent blue coastal states. Now imagine that 75% of your countrymen are rabbid red state Trump supporters, of low education, get most of their news and information from low quality Facebook shares, and are clearly misinformed about the world in many ways. Now imagine that the Federal government is much more powerful than the States, and that representative democratic policy will mostly reflect the will of Trump True-believers, the people fully supportive of the Capitol riots. How principled are you really about the rule of democracy?

Now I'm not suggesting that this is a good analogy for the Chinese situation, nor that this is how highly education urban Chinese think about democracy (though I do know a few who do seem to think that way). What I am suggesting is that democracy is not always and everywhere the slam dunk win that some Western liberals appear to think it is.

I write this as a second generation immigrant raised since elementary school with Western democratic values. I do believe that despite some flows it is the best system for most of Europe and the US. My parents fled the madness of the Mao CCP regime, and they've probably seen the worst side of the CCP. Yet they are ambivalent whether a US-style democracy today would be superior for the Chinese citizens to the current CCP.

[tablespoon]

> Assume for the moment that you're American, liberal, white collar and live in one of the more affluent blue coastal states. Now imagine that 75% of your countrymen are rabbid red state Trump supporters, of low education....How principled are you really about the rule of democracy?

Though implicit in that fantasy is that, without democracy, the blue-state liberal gets to impose his will on the Trumpers. Something that can keep someone like that committed to democracy is (for instance) the thought that the alternative is could actually be a never-ending dictatorship of Mitch McConnell, beating humanity with its chin waddle forever.

> Now I'm not suggesting that this is a good analogy for the Chinese situation, nor that this is how highly education urban Chinese think about democracy (though I do know a few who do seem to think that way). What I am suggesting is that democracy is not always and everywhere the slam dunk win that some Western liberals appear to think it is.

Are you saying that educated urban Chinese are hesitant about democracy because they get to vicariously impose their will (or something close enough to it) on the rabble via the CCP?

[beaunative]

The concern I have with China, right now, is that I suspect liberal democracy in China will be in favor of someone like Donald Trump, who will then have the power to turn it into dictatorship and this time 70% of the population will vote in favor of the Chinese Trump. Or likely a civil war would break out.

The ideological difference within China is not anything less then that of America. The gay marriage issue along could leave the country 80% to 20%, with the liberals on the 20% side. Yet in a authoritorian state like China, I don't think I've heard anything amount to hate crimes like that in the US, A lot of them would be scared to come out, but no one would be murdering them just for their identity. I think the issue with electoral democracy is that every issue is public, in constant debate, and people's political identity became so important to some that they are willing to kill.

People, expats especially, who live in affluent areas of China often lack the knowledge necessary to understand the less-developed areas of China. Like how people in California lack understandings of Alabama.

[bllguo]

> When educated Chinese people were better exposed to ideas about liberal democracy, they were very clear that they wanted it

This falls flat for me. So the implication is that there are no educated Chinese today with exposure to liberal democracy? I think we take for granted the supposed superiority of a system that empirically has delivered many recent failures.

[tablespoon]

> This falls flat for me. So the implication is that there are no educated Chinese today with exposure to liberal democracy? I think we take for granted the supposed superiority of a system that empirically has delivered many recent failures.

I'm not saying "no exposure," I'm saying they were "better exposed" in the past. You can even see changes like that happening in Hong Kong now, under the new crackdown on civil liberties. For instance, the government is now tinkering with the curriculum of a "Liberal Studies" course in Hong Kong to make it more "patriotic."

> I think we take for granted the supposed superiority of a system that empirically has delivered many recent failures.

Would you trade Donald Trump, Joe Biden, the Democrats, and Repubicans for Xi Jinping and the CCP (and everything that entails)?

[fighterpilot]

Sure, liberal democracies have had many recent failures, but they're still the most prosperous societies on a per-capita basis by a gigantic margin. If an authoritarian or non-democratic country can achieve over $40,000 GDP per capita, then we can revisit.

[refenestrator]

There's an interesting phenomenon, specific to US tech, where there are a ton of Chinese who quietly have a problem with the recent anti-china rhetoric, but they're not going to put a target on their back over it, they stay quiet. How do you even engage with someone who doesn't speak a word of Chinese and is so confident that they know all about China?

Meanwhile, the anti-china folks blithely go on about how much better freedom of expression is in America, and assume that silence means they are right.

[marderfarker2]

I feel like a lot of frustration in the west are due to a lack of voice from within China, who can explain the context and give their point of view. Instead all you get are these disjointed news and headlines without any depth to it. People then make assumptions based on it.

[sudosysgen]

Well, yes and no. Go to reddit for example, you can find endless amounts of people explaining the Chinese perspective and getting voted down and accused of being wumaos, and you'll get banned for it in many places too. At some point I imagine it gets tiring.

[refenestrator]

Go one level deeper and ask why you're never exposed to that viewpoint.

Washington Post and NYT will happily run Adrian Zenz all day long, even though he's a right wing religious nut and they're secular liberals, but you never see them print the majority viewpoint of actual Chinese people.

[starfallg]

>My experience of people in China-- admittedly a long time ago-- was they are generally very patriotic or nationalistic, like Americans. They appreciate the CCP and what it has accomplished. They have a strong domestic arts industry making movies, books, games. Sure lots of people disagree with the party, but that doesn't that they want a western liberal democracy.

Having been on the inside, it's not that they don't want a different system, it's that they see the real or perceived problems of our system as highlighted by their domestic media and generally from their point of view. This makes them substantially less enthusiastic than we think they would be.

The only way to convince them is to show them that liberal democracy does indeed yield better results, with people feeling more secure and leading happier lives. In order to do that we need to ensure that our democratic processes lead to solidarity and not division. That's why the last 4 years have been so damaging to our system, the fabric of the system has been damaged by extreme partisanship, without considering that standing together with our neighbours is in many cases more important than being 'right'.

[ypzhang2]

Anecdotally, western democracy was seen as a means to an end for many “common folk Chinese”. The end is prosperity. Now that the prosperity gap has drastically closed (also there are more clear paths to prosperity), the desire has also dissipated. China has also seen a China-like society in Singapore achieve a very strong economic and social outcome with authoritarian government, so western style democracies aren’t the only “role model” so to speak anymore

[starfallg]

I don't think Singaporean politics is particularly well regarded within China. In fact, it reflects the same issues as with the CCP and its authoritarian system. The Singapore system is seen as a necessary evil given the geopolitics of the region and the racial makeup of the city-state. The CCP is seen as a necessary evil to propel China into advanced economy status. This is just how things are.

[sudosysgen]

I think this position is very valuable. By far the best way for us to effect change in China politically, and every other major ideologically opposed nation, is to effect change at home, and be so sucessful that the superiority of our approach cannot be refuted.

Bonus point that there is a lot less chance of war this way.

[tablespoon]

> I think this position is very valuable. By far the best way for us to effect change in China politically, and every other major ideologically opposed nation, is to effect change at home, and be so sucessful that the superiority of our approach cannot be refuted.

I don't think so. Fixing domestic problems is a worthy goal, but it's wishful thinking to believe it will do anything to "effect change in China politically."

[em500]

Yup. People who get their news mostly from Western media might believe Chinese live in a repressive Orwellian hellscape, and conclude that if there is not widespread resentment against the CCP it must be because it's all suppressed. The truth is probably a lot more pedastrian: life in modern China is not bad at all, both in comparison to their own history and compared to other large countries in the world (NOT compared to exlusively rich countries). So a large part of the population is probably at least somewhat content with the current government.

Life is probably far from pleasant if you're an Uyghur or a Falung Gong, but the overwhelming majority of the population is not too concerned with their lot. The CCP clearly does suppress dissent, but it can be targetted to minority opinions.

The median Chinese citizen doesn't just see Western Europe and the USA and concludes that democracy leads to great results. (S)he can also see that it did not appear to bring great prosperity to India, Brazil or Russia.

[hodgesrm]

I'm troubled that your comment was downvoted. It seems very reasonable. Thank you for posting.

[Kaze404]

I don't understand the premise that the Chinese need to be convinced that the system we live in is the better one. Can we not accept that they are happy with the choices they made, and that not everyone needs to live under a repressive capitalist system?

[starfallg]

>repressive capitalist system

Are you implying that the current Chinese system is not repressive, nor capitalist?

[radmuzom]

One your comment on a "strong domestic arts industry", I would recommend this video.

"The Curious Story of China's Indie Gaming Scene"

https://www.youtube.com/watch?v=_VrTZ_UeUxM

[georgeecollins]

Thanks, that was interesting.

[JMTQp8lwXL]

Re-frame the question: if they could have western style liberal democracy without any bloodshed, would they? The answers you're seeing might be tainted with knowing the path to democracy would be painful, and all else equal, that pain is worse than the current power structure.

[sudosysgen]

There is without any bloodshed and without any bloodshed. The Soviet Union fell down with very little bloodshed, but around 7 million people died from the economic disruption, and the democracy that came from it was rapidly compromised both by local oligarchs and foreign powers in most of it.

I don't think the Chinese would want a fall of the USSR scenario, however little the bloodshed is. Economic disruption can kill a lot of people and there is not even any guarantee the next system would stand on it's own.

[tablespoon]

> There is without any bloodshed and without any bloodshed. The Soviet Union fell down with very little bloodshed, but around 7 million people died from the economic disruption, and the democracy that came from it was rapidly compromised both by local oligarchs and foreign powers in most of it.

But you're comparing apples and oranges.

Russia was still a command economy when the Soviet Union disintegrated, and went straight to democracy and capitalism at the same time with very little transition (IIRC, mainly because of the bad advice of Westerners who were too ideological and infatuated with markets).

China has already made the transition to capitalism, so I don't think a political transition to liberal democracy there would entail the kind of economic disruption Russia experienced.

[caoilte]

Don't forget that western liberal democracies look pretty un-attractive at the moment. When the choice is between a raving loony geriatric dementia patient and Trump a lot of people think they'd be better off without.

[forkLding]

This is still a similar viewpoint held by the young to adult generations of China although the idea of China as a democracy is definitely warming up but its more of at a certain date, China will transition to democracy instead of the current system being replaced now.

[dirtyid]

> exclusively consume the cultural products of the West

There's more penetration of western media and products in PRC, but vast majority of consumption is still domestic even among educated. And trends show the young are more nationalistic than ever, especially among those with more exposure to the west.

>North Korean style propaganda embarrassing. The disconnect really cannot be understated.

Yeah, folks are embarassed at the style of propaganda, ran by old cadres from for a bygone era. Not the idea of propaganda itself. They want better, modernized propaganda that effectively reinforces nationalism, especially abroad.

[magicsmoke]

On the one hand, they're right to cringe at the tone-deaf socialist era government communist propaganda. "How do you do fellow kids" with a communist flare. Clearly produced by cadres in their 60s in a communist bubble.

On the other hand, the current nationalist Chinese bubble is not that much better. Listening practice on Bilibili would be a lot better without the equally tone deaf comments about how all their neighbors are puppets of the US without any personal agency and owe their culture and history to 5000 years of glorious Chinese civilization. The current anti-Chinese sentiments in the west would be far worse if your average American spent even 30 minutes on Chinese websites. They can complain all day about how biased BBC is towards China (arguably true), but I don't see CGTV overtaking BBC globally in popularity anytime soon. One whiff of that smug self-superiority is enough to make anyone regret learning Chinese.

[dirtyid]

Nationalists everywhere are insufferable. The aspiration for "lovable" PRC propanda is just aspirational. IMO very little chance PRC will be able to out-propagandize west/US especially among west/US aligned partners. Language/cultural divide too big. I think domestically people will just settle for less cringy interntionational rhetoric, which itself is a losing game since western media will interpret translations with liberty regardless. It doesn't matter that PRC citizens are relatively apolitical on the whole, with 1.4B population statistics there's will always be too many absurd nationals to paint narrative. Really PRC strategy of maintaining different internet/cultural bubbles and targetting msgs at more receptive Chinese diasphora audiences is on point. Once attempt at "lovable" propaganda fails, PRC will pursue Russia style disinformation because ultimately that's whats most pragmatic given the divide and realities of competition. Also more of those PRC cartoons that called out western hypocrisy that was well recieved domestically and made western media look ridiculous by coordinated labelling them photographs. Or calling out Canadian indigenous drama, Australia enviromentalism etc, stuff that has had more ramifcations on the domestic politics of Canada and Australia leaders than west pressing on XJ/HK/Tibet, which Xi doesn't lose sleep over.

[tablespoon]

> Meanwhile, young, educated people almost exclusively consume the cultural products of the West, Korea, and Japan.

What now? China has a pretty extensive film and television industry, and as far as I know it's very popular.

> And they find the North Korean style propaganda embarrassing. The disconnect really cannot be understated.

And in that case, the most logical reaction is political disengagement, which is completely A-OK in the CCP's book.

[blacksmith_tb]

You might think so, but slacking now seems to be considered to be dangerously rebellious[1] by the CCP.

1: https://qz.com/2019322/why-lying-flat-a-niche-chinese-millen...

[tablespoon]

That's different, the "slacking" of which you speak is a kind of dissent.

What I mean by "political disengagement" keeping a distance from political issues and otherwise "saying withing the lines," so to speak.

[blacksmith_tb]

I see what you mean, it's "going through the motions" without trying too hard, compliance but not enthusiasm.

[mc32]

I'm sure this is one aspect of it. They surely don't want "foreign decadence" to influence their youth --which is part of losing control over narrative.

It's kind of typical socialist thinking that you can have forever revolutionary songs and chants, forever reconstruction and forever community activism (for the party of course). Obviously, that can work in tightly controlled environments such as North Korea, and it looks like they are taking some of that social control back so they can better dictate what they population should do (for its own good as they see it, obviously).

[sudosysgen]

I don't think this is so naive. Jack Ma, for example, disappeared last year shortly after a speech where he called the finance regulators incompetent and tried to use his fortune to bypass them. What probably scared the Chinese government is that he got close to getting away with it. If I recall correctly, that was the flash point for the Chinese Big Tech crackdown.

[refenestrator]

Worth noting that ANT financial had major risk and accounting shenanigans and regulators were probably in the right to block the IPO until they were sorted out better.

[russli1993]

umm. It seems like so many people internationally sympathizes with Jack Ma and Ant, and accuses the Chinese government as oppressing. Lets look at the reality.

Ant has China's most dominate online and mobile payment system, alipay. It has consumer lending products like huabei. Ant ties its payment product with lending product, say if you a colleague student buying a $500 shoes on Taobao, you get to the checkout screen, you are like hey $500 is too much for my monthly budget, can't afford this, Alipay then says oh check this out, through Huabei you can get your shoes now only have to pay back a small portion each months. Ant loan money to consumers, then take a bunch of loans lump them together and divide into securities and sell them to other investors, i.e. classic ABS scheme. Ant even says "since we know the consumer spending and payment habits, we have big data algorithm to calculate the rating of the securities and credit score of the consumer". Consumer credit score is supposed to be a check and balance to prevent lending to high risk individuals, security rating allow investors to be confident about the security they are buying. Now Ant financial is the check and balance to itself in both cases.

Through ABS, Ant externalizes all the risk of lending to outside investors. Financial institutions might include Ant's ABS in other securities. A middle class person might buy retirement investments, which have exposure to Ant's ABS. If you own shares of financial institutions that owns Ant's ABS or securities exposed to Ant's ABS, you are also exposed to Ant's ABS. The exposure is everywhere, can't be isolated. From Ant's perspective, they earn a profit from each dollar they lend, so they got all the positives and none the downsides. This could be a reason why Ant lends to consumer who are much riskier than traditional banks in China lends to, and through my experience, riskier than US credit companies lend to. US credit card companies require a stable job, a home or rent, or a dependent with good credit score. Ant lends to colleague students in China that have non of that. Nor do they check the credit rating of the dependent(parent). If the lending goes bust, for example, triggered by an economic down turn, these ABS will drag down everyone exposed to them. Basically how US financial crisis happened, causing suffering 10s of millions of people. The government's action didn't ban Huabei, and Ant. They are just treating Ant as a financial institution, subjecting it the same rules and standards another financial institution (e.g. a bank). The goal is to reduce financial risks. Why is this a bad thing?

The regulators wanted to use existing financial regulation standards, based on Basel Accords, on Ant. But they were on the fence about it because they didn't want to limit a new form of business emerging, or want to limit what a "private" business want to do. But Jack Ma's statement basically called existing financial regulation, and the Basel Accord itself "stupid, out dated, incompetent". In my opinion, that is unacceptable because while Basel accords has its downsides, it's learnings from many financial disasters that caused suffering to millions of people. Its like airplane safety regulations, are they a hassle? yes. But they are there for a reason. And of course a business person will advocate for reducing the rules that limit their ability to earn money, but reducing the rules will increase the risk the entire society will be harmed, especially the under-privileged. A financial crisis triggered by Ant's reckless lending might leave Jack Ma and Ant's executives slightly less wealth, but they sill got all the other cash in the bank. But for a middle class person, the financial crisis will cost them their jobs, their mortgaged home and their retirement savings. And that middle class person didn't do the things that caused the financial disaster in the first place.

Business people will brand their advocacy as something for good, brand things they are against as something old, outdated, cumbersome, use marketing or media power to sway public opinion. Unless you are well versed in financial theory, how can you tell the truth? Most likely that was the final straw. Regulators finally had to gut to required Ant to be regulated as a financial institution similar to a bank. In my opinion, Ant should be regulated like so from the beginning. They lend money, they issue ABS, of course they are a financial institution, subjected to the same rules, same capital requirements like everyone else. Why should they get preferential treatments, not obey by the same rules. The regulators aren't hard liners, they are too weak. They were probably held back by the public opinion about Chinese government is against private industries, so they are afraid to do things that other might say "limit their freedom, hinder private business development, ccp controls private sector etc", including holding business accountable for legitimate reasons. Now these regulators finally have the gut to do the right thing.

[systemvoltage]

You have it backwards. Jack Ma was scared and emerged in a video tape out of nowhere. Why would CCP be scared? That doesn’t make any sense.

[sudosysgen]

He didn't seem scared to me, and the "video tape out of nowhere" was a speech at the Bund Financial Summit in Shanghai : https://interconnected.blog/jack-ma-bund-finance-summit-spee...

Why would one of the richest men in China openly defying the most basic financial regulations, and then trying to strong-arm the regulators by IPOing as fast as possible before regulations could be finalized, thus making them hurt a lot more people, and almost getting away with it, scare the CCP? I don't know, you ask me. I have no idea how an authoritarian government could be threatened by one of the most powerful people in their society openly calling them incompetent, defying them, and trying to make laws ineffective. None at all.

[jeswin]

One scenario would have been Jack Ma (along with family, of course) being outside China wile making the statement. Given his reach and popularity, that would have been a serious blow to CCP PR. He'd lose most of his billions, but this risk existed.

Most regimes and communist systems are paranoid. They'll make sure there wouldn't be another Jack Ma.

[justicezyx]

> Jack Ma, for example, disappeared last year shortly after a speech where he called the finance regulators incompetent and tried to use his fortune to bypass them.

MSM tried to paint such picture.

Mr. Ma put that show, because of he knows that the regulators are coming to ANT IPO. And he disappeared because a lot of people are going to be very angry after Mr. Ma failed to push the IPO through. Think a bit, who are those angry men. I guarantee you'll never find the names of these people, thinking them like political power that collectively can rival the infamous Mr. Xi.

CCP is bully.

But when it's bullying the one who romanticize 996 [1], hell, yeah, I enjoy that Mr. Ma gets bullied...

[1] https://en.wikipedia.org/wiki/996_working_hour_system

[miohtama]

It is simple rule of authority system, not rule of law system. The only way to win is to give the party members enough shares or bribes so that they like you and see you as the member of the club. Chinese authorities are especially thin skinned and will see moves like this also as the win against any criticism.

[russli1993]

lol, you are so wrong here. If the way to win to give party members enough shares or bribes then any of the regulatory actions the past year wont happen.

Ant's case: treating Ant like an financial institution. Setting standards on capital requirements, lending standards etc. Perform financial pressure tests similar to banks. Ant lends money, issues ABS, of course they are a financial institution, should subject to the same rules as anyone else. Upside: reduce financial risks, especially if there is economic downturn. If a financial crisis like the 07 crisis happens, the wealthy might be fine, but the middle class people might lose their jobs, their mortgaged house, their retirement investments into companies that are bankrupt. So preventing a financial crisis is protecting people's livelihoods. The government action shows its not afraid to halt a multi-billion dollar IPO to do this.

Alibaba: establishing Alibaba had "dominate position" in E-commerce industry based on market data between 2015 and 2019 and as such, require seller exclusivity is against anti-monopoly law. Upsides: Make this scenario as a precedent, deter future cases from happening. Reduce the dominate player's ability to bend the rules to hinder competition. Allow more choices for sellers, the majority of which are small businesses. Alibaba's seller exclusivity harmed both competition and the sellers.

Tencent: Establishing Tencent's taking majority of controlling stake in 中国音乐集团, resulted in Tencent being dominate position in online music service. It is illegal under anti-monopoly law for not reporting such transaction for review. And by anti-monopoly law, state council can order the entity to take action to reduce its market consolidation. The action ordered is Tencent cannot sign exclusive music licensing with upper stream suppliers. After Tencent's transaction, it signed exclusive music licensing with Warner, Sony and Universal. This has been devastating to competing music services, Netease cloud music, Xiami music, etc. Upside: Establish precedent. Ensure there is room for competition. Good for competitors.

The advisory on Meituan and food delivery platforms: Attempt to address some key public concerns about food delivery platforms. Food delivery workers extremely overworked by delivery platforms, low pay, lack of safety, insurance protection, and practices such as penalizing delivery workers for late deliveries while over stuff them with orders. Upside: good for delivery workers or other gig workers. Also good for companies because the government is not making drastic changes that destroy the fundamentals of their business. Instead, it is issuing a sensible plan of action that are not too costly for the companies. Also calls for them to investigate different approaches to solve delivery workers pain points.

The advisory on K12 education outside of school: This is a lot more controversial. The background is that most Chinese students spent their time outside of school, during weekends and summer break, in some kind of prep classes, it could be English, math, etc. Chinese parents sent their kids to these prep classes hoping their kids can get ahead of others. When I was growing up, as a primary schooler, my Saturday is Violin class, a English class, my Sunday was a math class and a English class. My summer weekday is all English and Math classes. I heard parents would sent their kindergarten kids to prep class teach grade 2 material. The thing is the prep classes is now a huge industry. Prep class companies market to parents and kids, telling them things like you can get ahead others, you need come to us to learn to get good grades to go to university. Parents spent huge amount of money on "out of school" classes. Another issue is, as these "out of school" classes and companies earn a lot of money, they can pay their teachers much more than public school. So good teachers are leaving public schools, resulting in decreasing quality, more kids have to take "outside" classes, creating a vicious cycle, adding to kids time burden and parents financial burden. The most dangerous thing this creates is segregation of education quality based on economic class. Parents with money can send their kids to place with best education resources, while parents without money send their kids to public school with lower education quality. The new k12 education advisory is about trying to return education to its public, universally benefiting nature, reducing the profit seeking tendency. It is also trying to reduce parents and kids access to "out of school" education and strengthen public school education in order to give kids more non-study time. But time will tell the impact of these policies, what are the positives, are the negatives too harmful, and unintended side effects. "advisory" in China are different than laws. They are kind of best effort, are negotiated and discussed about during actual implementation. And these advisories are updated frequently when they need changing. This is a big reform of education scene, if it is successful it will create a more healthy atmosphere for Chinese kids to grow up in and less burden on families.

[onlyrealcuzzo]

This doesn't make sense to me.

Centralized power is good (if that's what you want, and it seems like that's the MO of the CCP).

They just need to control it.

They should want Tencent to take over the world - with them in complete control of Tencent (which they basically already are).

Why should the CCP afraid of Tencent getting big instead of trying everything they can to make Tencent and ByteDance etc bigger?

[OminousWeapons]

If they get too big and powerful they can theoretically pose a threat to Xi Jinping's hold on power. These crackdowns and the actions against Jack Ma are designed to show that the state will always be in control.

[ypzhang2]

Two flaws would be to assume A) the ccp is a monolithic entity And B) they have complete control over tencent et al. Some control isn’t complete control.

Factions exist in the ccp and having outside concentrations of power can lead to dangerous fragmentation that can also affect the internal politics of the ccp

[yorwba]

Right now, Tencent makes a lot of money selling data on Chinese citizens to the highest bidder for the purpose of ad targeting. The government isn't going to do "everything they can" to make Tencent bigger if "everything" includes allowing anyone with deep enough pockets to put their population under surveillance. Hence the network security review.

[kevin_thibedeau]

The bigger threat is apps with massive vertical integration that are popular in Asia. The West hasn't gone down that rabbit hole yet.

[beaunative]

Social stability IS econimic power in the long term. Any anti-trust enforcement of that sort is beneficial for the overall market, even if the largest business in that sector will suffer. Short term economical metrics really don't and shouldn't matter that much to a well functioning economy.

[dv_dt]

By reining in large corporations which may optimize for their own profits over social good and even economic competition may result in stronger long term economic might.

[malwarebytess]

I think that may be part of the point. In matters of state, in China, markets react to policy not the other way around. In the west markets direct policy through a kind of indirect or virtual parliament.

Whether China's approach is wise or not...I don't know.

[elefanten]

What examples do you have of this "indirect parliament" effect?

Yes various interests lobby the government all the time. But what are the best/clearest examples of the market tail wagging the policy dog?.

[malfist]

There's a whole host of examples. Pretty much anything that asks the government to accept risk or loss of a company but doesn't share profits are good examples.

Net neutrality is a great example. Paying telecoms to build infrastructure that they don't build and just pocket. The case in Ohio recently where their energy company bribed officials to give them a 1 billion dollar bail out.

Another is any regulation that's not done for the greater good. Like in my state you have to be a licensed bartender and have graduated from a bartending school. Guess who pushed for that requirement? It wasn't the public.

[curiousgal]

Insert here any president boasting about the Dow Jones hitting a new high while they're in office

[matheusmoreira]

Good. Regulators shouldn't care about stock prices at all. They should always do the right thing and let the market crash if necessary.

[xxpor]

That's absurd that they shouldn't pay ANY attention. You can go too far in both directions. The stock price is an indirect indicator of the material impact of the regulation.

[matheusmoreira]

Regulators should pay absolutely zero attention to stock market. If the stock price crashes, it's because the company's value was derived from the exploitation and abuse that regulations are supposed to prevent. They were never supposed to be that valuable in the first place.

Regulations should cause as much damage to stock price as possible. We should measure the effectiveness of regulations by how much they tank the stock of affected companies. Real change often affects the profits of corporations. If nothing happens, then I doubt the new rules are actually gonna change anything for the better.

[xxpor]

I think you're saying the purpose of regulations should be to hurt the stock price of companies. That's seriously crazy. Why not write a regulation simply outlawing public stock markets?

The purpose of regulations are to make people's lives better. That could mean protecting them from harms, or preventing other undesirable outcomes. There should be a cost benefit analysis applied there. Of course some things are hard to measure so there will be arguing on the margins.

The place I do agree with you is that if a company's business is doing regulation compliance (see: Intuit), then their viability shouldn't be a factor at all.

[matheusmoreira]

I'm saying regulation is likely to be ineffective if it doesn't hurt stock prices.

[rsynnott]

> Fascinating how the Chinese authorities seem to be regulating the these companies with complete disregard on how the stock market might react.

I mean, that's fairly normal, surely? _Any_ aggressive regulatory action is going to upset the stock market; it regulatory bodies had to take the stock market's delicate feelings into account they might as well shut their doors.

[joyeuse6701]

We (the west) may see this as shocking, but I believe this isn't equivalent to the U.S. gov't doing something that would crash the NYSE or NASDAQ. If the Chinese gov't did something that undermined real estate value, where most Chinese citizen's savings are parked, that would be more comparable.

[hklutryhgg]

There is speculation that China is clamping down on soft tech (social apps, ...) to encourage people to work on hard tech (hardware, ...).

China's semiconductor company spiked today on the stock market.

[woxko]

Fascinating that they care more about national security (in their own way) than feeding the already fat shareholders as the US would do.

[itake]

who are the share holders? Retail investors? Has China ever cared about retail investors?

Or does this regulation lower the price so institutional investors get a discount?

[swuecho]

In China, retail investor are called '韭菜' (Chives). Obviously, nobody care.

[itake]

yeah, I wonder if they do it b/c:

1. the og investors cashed out. leaving retail holding the bag.

2. they buy the stock at a discount

[paganel]

Don't think the Chinese government cares about purchasing any Chinese company's stock at a discount, if the need arises they can of course nationalise it almost on the spot.

[atatatat]

Chinese government individuals may, especially lower tier ones.

[elliekelly]

I think they do it because information (and control over that information) is more valuable to them in the long run than whatever economic/financial gains they might sacrifice.

[itake]

They could of added the regulation at a slower pace instead of pulling the plug on everyone.

[neolog]

> with complete disregard on how the stock market might react

Even better, they're intentionally redirecting finances away from companies they don't like.

[starfallg]

>Fascinating how the Chinese authorities seem to be regulating the these companies with complete disregard on how the stock market might react.

The stock market reaction is a part of the show. They aren't banning things despite it, they are actually flexing to show authority (albeit in a crude manner).

[beaunative]

Last time I checked, plenty people on HN claiming those enterprises are branch of the government `since they operate in China`, which I still do consider to be one of the most ignorant and arrogant comment on Chinese businesses.

If governments can actually be that successful in dicating and operating businesses, then the communism world would never have failed so miserably, the control the Chinese government has over companies is really no more than that of the United States governments (from federal to local), just look at how the federal governments banned all kinds of business activites, how the `do no evil` company bidding for defense contract. It's a pity many of the readers live in the imaginative world where the US is free of all evils, with China being the opposite.

[cyanydeez]

the stock market in china is not a free market.

[varispeed]

> on how the stock market might react.

The stock market is just a facade, a theatre, to appear to the West that Chinese economy is somewhat legitimate. In reality everything is in CPC hands and all these companies only appear to be private.