The Logic of Future Asset Allocation Has Changed Completely Continue reading
On June 16, 2017, Oriental Daily, a Chinese language newspaper in Hong Kong published an article titled, “Wu Xiaohui Is Finally under Investigation; Who Is the Anti-Corruption Sword Pursuing?” Wu Xiaohui, chairman of the Anbang Insurance Group in China, is the grandson-in-law of Deng Xiaoping, the second-generation top leader of the Chinese Communist Party (CCP). When Anbang was established, in the early stages, its original shareholders were state-owned enterprises in Shanghai including SAIC Motor Corporation Limited (Shanghai Automotive Industry Corporation). All of these enterprises are related to the families of Jiang Zemin, the former top CCP leader after Deng Xiaoping.
Wu Xiaohui became wealthy very quickly due to support from these state-owned enterprises. When Anbang did not make much money, those state-owned enterprises stayed with Anbang; but when Anbang entered the rapid development and profit cycle, the state-owned enterprises withdrew from Anbang. They took a low premium and stopped enjoying the big dividends as Anbang grew.
Many state-owned enterprises play a role as stepping stones for the elite families. State-owned enterprises set up a platform first, if the platform makes money, the state-owned enterprises will find an excuse to withdraw and will transfer their interest to the elites or their agents; if the platform loses money, the losses belong to the nation, and it has nothing to do with the elites.
Oriental Daily suggested that, when the authorities were investigating Anbang, it looked better to investigate all of the similar companies together.
In addition, it is questionable why Anbang has gone crazy making acquisitions overseas. Where did the funds for these mergers and acquisitions come from? Why did Anbang go overseas to make acquisitions? With the arrival of the big data period, if the cash cannot be circulated, the elites’ cash may soon turn into waste paper. However, the amount is so large that an ordinary company simply cannot accommodate it, so they use an insurance company to circulate the cash. Overseas acquisitions provide a good opportunity for the elites to get money out of China. By laundering money, they turn black or grey money into white money through acquisitions. When Anbang purchased the Waldorf Astoria and other well-known hotels, some people suspected that this was money laundering.
Source: Oriental Daily, June 16, 2017
Xinhua recently reported that the Chinese Ministry of Human Resources and Social Security revealed that, based on its January to May statistics, the national pension fund saw a deficit in some regions. In Northeastern China, where most of the old industrial bases are located, the pension fund income is lagging behind its expenditures. Northeastern China has a much bigger retirement population, with fewer people paying into the pension accounts. The Ministry’s statistics also showed a significant imbalance among regions. This is a reflection of uneven economic development trends. The data demonstrated a clear structural difference between Eastern China and Midwestern China. Eastern China contributed a much bigger surplus to the overall pension fund. In order to ensure a healthy balance in the fund, the Ministry is planning to extend participation to all citizens, increase the government’s contribution to the fund, expand the scope of the market in which the pension fund can invest, and include company contributions as an income source for the fund.
Source: Xinhua, June 23, 2017
Well-known Chinese news site Sina recently reported that Geng Shuang, spokesperson for the Chinese Ministry of Foreign Affairs, commented on the suggestion that French President Macron made to give the European Union more power. The additional power is intended to allow the EU to be able to restrict China’s investments in Europe, especially in some of the critical industries. Geng recognized that China did pay attention to Macron’s suggestion. He further said that many countries in the world, European countries included, are emphasizing fighting against all kinds of protectionism under the current atmosphere of the anti-globalization mindset. He confirmed that China did encourage its investors to develop opportunities in Europe while requiring them to obey local laws and rules. China also hopes that Europe can provide the Chinese investors with a fair, just, and favorable investment environment.
Source: Sina, June 23, 2017
Liberty Times reported that the wealthy American investor Tim Draper announced that he has stopped investing in China or in any companies headquartered in China, due to difficulties in getting money out of China.
Draper is a famous investor from the United States. In the past, he successfully invested in Tesla, Hotmail, and Skype.
In the past few years, China has experienced a slowdown in economic growth and in money outflow. To reduce the pressure on Renminbi devaluation and save its foreign reserves that have been dropping rapidly, Beijing has taken a series of actions since November of last year to tighten the control of capital, preventing companies from sending money out of China.
Itamar Har-Even, the Co-CEO of Ion Pacific, a Hong Kong consulting company for investment banking and funds management, thinks that China’s capital control has hurt many companies’ global investment desires. He said, “We have spent a lot of time (thinking about) how to get money out of China.”
Source: Liberty Times Net, June 7, 2017
Guangming Daily published an article which stated that a new regulation that the China Security Regulatory Commission introduced is set to become effective on July 1. The regulation requires that investors fill out a survey on “Risk Tolerance Ability.” The sample questions include questions such as current source of income; educational background or work experience; and plans to utilize returns from the investments. Then the investors will be divided into the following five types based on their ability to take risks, and how conservative, cautious, stable, active, and aggressive they are. Securities will be divided into different levels based on the level of risk. Investors in each category will only be able to purchase securities that fit their category or any categories that are rated lower than theirs. The new regulations are said to “sell the right products to the right group of investors.” The article pointed out that the new regulation will affect 125 million investors and will likely mean that not every citizen will have an opportunity to participate in trading securities.
Source: Guangming Daily, June 20, 2017