China is so volatile, do we still invest in China?
At first it was the fintech attack. Last November China’s Communist big wigs stopped the $37bn initial public offering (IPO) of Ant Group, a financial-technology titan, and forced it to modify its lucrative loans and wealth management asset-light business into something more onerous and ‘societally responsible’ like a bank with statutory requirement of deposits and be more accountable to watchdogs. Since then other behemoths, the renown Alibaba and Tencent, have been targeted. Recently, regulators banned Didi Global’s ride-hailing app over data ‘issues’, less than a week after its $4bn IPO in the Big Apple. On July 24th, online-education companies were told they can no longer make a profit which for many investors signalled the end of China’s capitalist model state.
China was and still is a Communist country which had begun its love affair with a capitalist model bringing great wealth to the country as well as enriching many individuals after many years closed off to the world. However, what has inadvertently happened is the rising gap between the rich and the poor with wealthier workers in Shanghai, Beijing earning at USD25k per annum vs 40% of the population earning only RMB964 per month. This rising inequality has made the country sit up to pay attention to a possible Tiananmen Square Massacre if this continues unabated. The people have had a long running resentment of the rich, a simmering hatred called the Wealthy- Hating Complex.