The Sudden Downfall of Changpeng Zhao, the Crypto Titan Behind Binance; China Set to Name Zhu Hexin as Head of FX Regulator
China Puts Country Garden on Draft List of Builders to Support; Chinese City Cracks Down on Stock Market Rumors Amid Slump
Welcome to this issue of The China Brief. Today is November 22, 2023. Here at The China Brief, we bring you the latest news on China's politics, economy, and society from global media sources, along with exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.
China Set to Name Zhu Hexin as Head of FX Regulator: Reuters
Bloomberg
China is expected to name Zhu Hexin, a banking veteran, as the head of its foreign exchange regulator, the State Administration of Foreign Exchange (SAFE). Zhu was previously a contender for the position of governor of the Chinese central bank, but that role was filled by Pan Gongsheng. Zhu has over 20 years of experience in the banking sector and previously served as vice governor of Sichuan province and as a deputy governor of the People's Bank of China. He has also been the chairman of financial conglomerate Citic Group. Zhu is expected to be re-appointed as a deputy governor of the People's Bank of China.
US dollar dominance is facing a crypto-yuan hostile takeover
Financial Times
The US Treasury has warned Congress that dollar-based digital instruments, stablecoins, and crypto exchanges pose significant risks to the financial system and the US dollar's pre-eminence as the currency of choice for contractual settlements. Crypto stablecoins and related exchange transfer platforms, controlled by the Chinese Communist Party (CCP), could disrupt the US dollar-based settlement system and undermine the ability of the US to impose economic sanctions on bad actors. The CCP seeks to dethrone the US dollar and the dollar clearing and settlement systems due to its complaints over US sanction policies. Crypto tokens provide a robust settlement mechanism for legitimate economic activities but also enable illegitimate activities, such as funding terrorist groups and evading US sanctions. The emergence of an opaque, unregulated offshore dollar-denominated transfer mechanism is directly counter to US interests, and the US needs to offer an alternative or define acceptable compliance standards.
US thwarted plot to kill Sikh separatist on American soil
Financial Times
US authorities have foiled a plot to assassinate a Sikh separatist on American soil and have issued a warning to the Indian government regarding its possible involvement in the conspiracy, according to anonymous sources. The target of the plot was Gurpatwant Singh Pannun, an American and Canadian citizen who is general counsel for Sikhs for Justice, a US-based group that is part of a movement pushing for an independent Sikh state called “Khalistan”. The US has shared details of the plot with a wider group of allies following the murder of Hardeep Singh Nijjar, a Canadian Sikh separatist killed in Vancouver in June.
Chinese police arrest tech founder on suspicion of running casino
Financial Times
The founder of Tencent-backed game-streaming site DouYu, Chen Shaojie, has been arrested in China on suspicion of operating a casino. Police in the small southwestern city of Dujiangyan confirmed that they had arrested a man with the surname Chen. Since founding DouYu in 2014, Chen has built the company into one of China's leading game-streaming and esports brands. However, he has faced challenges more recently, including a failed plan by main backer Tencent to merge the group with rival Huya, and a crackdown by Beijing on livestreaming sites.
The Sudden Downfall of Changpeng Zhao, the Crypto Titan Behind Binance
Yahoo US
The founder of Binance, Changpeng Zhao, has pleaded guilty to criminal charges for money laundering and violations of US sanctions, according to Bloomberg. He will pay a $50m fine and has resigned as CEO. Binance itself will also pay over $4bn in penalties and plead guilty to criminal charges. Zhao’s resignation follows a year of controversy for the firm, which has faced increased scrutiny from regulators and law enforcement agencies globally. Earlier this year, US regulators charged Zhao and Binance with violating US securities laws, although the firm and its CEO appeared to dismiss the charges. Zhao said Binance would “get through” the scandal, although there would be “changes in structure”. Richard Teng, a former civil servant, has taken over as CEO.
Alibaba exec moves to quell staff concern over Jack Ma share sale with internal post
Yahoo US
The decision by Jack Ma's family trust to sell some shares in Alibaba was a coincidence and not linked to the company's decision to scrap the listing of its cloud unit, according to Jiang Fang, an Alibaba partner and its chief talent officer. She added that the trust was required to disclose the plan by mid-November under US securities rules. Last Friday, Alibaba wiped $20bn off its market value after the company unexpectedly cancelled plans to spin off its cloud and groceries businesses.
OpenAI Says Sam Altman to Return as CEO
WSJ
Sam Altman will return as CEO of OpenAI, and the company will have a new initial board including Bret Taylor, Larry Summers, and Adam D’Angelo. Bret Taylor will be chairman of the board. An independent investigation will be conducted into Altman's ouster and its aftermath.
China Puts Country Garden on Draft List of Builders to Support
Bloomberg
Chinese developers Country Garden Holdings, Sino-Ocean Group and CIFI Holdings have been included on China's draft list of 50 developers eligible for government financial support, according to people familiar with the matter. The list is being compiled to guide financial institutions as they assess support for the property industry. The inclusion of distressed builders such as Country Garden shows a shift in regulators' stance towards some of China's largest private developers as the property crisis deepens. The full list has not yet been published.
Chinese EV Battery Maker CATL Said to Explore Hong Kong Listing
Bloomberg
Chinese battery maker Contemporary Amperex Technology Co. (CATL) is considering a second listing in Hong Kong, according to sources. The company had previously planned to sell global depository receipts (GDRs) in Switzerland, but that plan has been put on hold. The size of the potential Hong Kong listing has not been determined and CATL could still decide against the share sale. The company is the world's largest maker of electric vehicle batteries. Earlier this year, it chose banks for its planned GDR sale, which aimed to raise at least $5bn.
Chinese City Cracks Down on Stock Market Rumors Amid Slump
Bloomberg
Authorities in the Chinese city of Chengdu have arrested a man for spreading false information online about measures to overhaul the stock market. The man fabricated a foreign media report claiming that reforms were imminent, which disrupted the securities market and misled investors. China's stock market has been struggling, and false rumors often circulate on social media platforms, adding to the volatility. The arrest comes as efforts to boost the market have failed, with the CSI 300 benchmark down over 8% this year. Earlier this year, China's securities watchdog fined a company for fabricating news that caused iron ore futures prices to spike.
A new front is opening up in the U.S.-China conflict over chips
Japan Times
U.S. President Joe Biden is increasing efforts to constrain China's technological progress by focusing on the packaging of semiconductors. This area is seen as a path to achieving higher performance and is not currently subject to sanctions. China is also capitalizing on advanced packaging, capturing global market share and making progress in an area where it has been denied in the manufacturing of high-end chips.
Modi Hosts G-20 Leaders in Video Meet, But Xi and Biden to Skip
Bloomberg
Indian Prime Minister Narendra Modi will host a virtual meeting of leaders from the Group of 20 (G-20) on Wednesday, although Chinese President Xi Jinping will not be attending. Instead, Premier Li Qiang will represent China at the meeting. The meeting comes as Modi’s term as president of the G-20 is ending, during which he sought to enhance India’s global influence. A “large majority” of G-20 leaders are expected to attend the virtual meeting. US President Joe Biden will not be attending, while Russian President Vladimir Putin will address the gathering. India hopes to review the progress made during its presidency, which focused on the development of emerging economies.
China Must Avert Global ‘Hard Decoupling,’ Ex-PBOC Adviser Says
Bloomberg
A former adviser to the People's Bank of China has warned that China needs to prevent a "hard decoupling" from the global economy as the world becomes more politically divided. Li Daokui, a former member of the central bank's monetary policy committee, stated that the world economy is effectively divided into three parts: the US and Latin America, a Germany-led Europe, and a China-headed region including Southeast Asia. Li argued that China should maintain its global links while expanding the bloc it leads, and cited initiatives such as President Xi Jinping's Belt and Road Initiative and China's engagement in the BRICS group as examples. Li disagreed with former PBOC deputy governor Zhu Min's warning that the world is in a "gradual slowing cycle," stating that China is facing deflation and insufficient consumption, which is opposite to the cycle in the US. Li predicted that economic activity in China will be stronger next year and forecasted economic growth of about 5% in 2024. He also stated that the US dollar's global status and impact is declining and that other countries are increasingly indicating a willingness to settle trade with China in the yuan. Li urged China to step up the global infrastructure for the yuan's use and deepen the government bond market to draw investment from foreign nations.
‘Tourist investors’ punish Japan’s earnings misses
Japan Times
Japanese companies that have missed analyst forecasts have seen larger drops in share prices than usual, which is being attributed to an influx of ‘tourist investors’. These investors are relatively new to the Japanese market and may have unrealistically high expectations, resulting in disappointment and selling off of shares when companies miss expectations. Many global investors are turning to Japanese stocks as an alternative to the declining Chinese equities market.
Stock That Crashed 95% on Xi’s Edtech Crackdown Is Roaring Back
Bloomberg
New Oriental Education & Technology Group, which suffered a significant drop in its stock price following China's crackdown on the for-profit education industry, has seen its shares more than double this year. The company has diversified its business model to include e-commerce and travel, and has benefited from the exit of some rivals. New Oriental reported a 48% increase in revenue in the most recent quarter compared to the previous year. The company's stock price has rebounded more quickly than that of its rivals, such as TAL Education Group.
China Fines iPhone Maker Foxconn $2,800 Amid Major Tax Probe
Bloomberg
Foxconn Technology Group subsidiary, Foxconn Industrial Internet Co., has been fined 20,000 yuan ($2,800) by Chinese tax authorities for overstating expenses. The subsidiary, located in Wuhan, was penalized for its accounting of research and development expenses in 2021 and 2022. This comes as China is conducting a broader investigation into the operations of the iPhone maker. The investigation includes looking into Foxconn's tax affairs in Guangdong and Jiangsu, as well as land use in Hubei and Henan. Foxconn founder Terry Gou, who is running for Taiwan's presidential election, has said that the Chinese government would not dare touch his business empire.
Hong Kong bankers have lots of free time, anxiety as deals slump, lay-offs jump
South China Morning Post
The decline in China's economy is affecting investment banking in Hong Kong, with banks and law firms cutting jobs and deal values falling. The value of mergers and acquisitions in mainland China and Hong Kong has fallen 6% this year, on course to be the lowest total since 2013. The decline in initial public offerings is even more extreme, with this year set to be the worst for Hong Kong debuts since 2001. The slump is also having a knock-on effect on law firms and consultancies, with Linklaters laying off 30 lawyers and Dentons hiving off its Chinese operations.
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