I see quite a few posts on China this morning and want to clarify a few points. In full disclosure I lost over 300k on Chinese stocks in a combination of shares, warrants, and options. Yes, I am glad I sold because my losses would be even greater.
- Chinese entrepreneurs like to IPO in America because the entrepreneurs and VCs are given US dollars for their shares. For those that didn’t know it is almost impossible to move money out of China. This is true for American companies such as Apple and Starbucks, the money stays there. It is a closed capital account. IPOs in American markets means foreign investors (American investors) can get liquidity when investing in a Chinese company.
- The CCP was more than happy to allow American IPOs because they need US dollars. The world does not trust the Renminbi and it is only used in 1 percent of transactions compared to 60 percent for the US dollar. China must use US dollars to trade with the world. (If anyone is familiar with the Belt and Road you will know China uses dollars to fund such project). When Chinese investors and entrepreneurs are allowed to sell their shares in American markets they bring in US dollars.
- China has global ambitions of being a super power. After watching a certain guy (not trying to get political) get banned from social media and made irrelevant, Xi and the CCP woke up to the reality it could be next. The party then decided to crack down even further on its entrepreneurs, who the CCP believes may one day oppose it. The crack down on the Ant IPO was just the start. (For those who don’t know, China does not take criticism well. If Apple/Tesla was to criticize the CCP both businesses would fail to operate in China (this happened to Hilton for naming Taiwan as a country, but only for a week).This is why you see NO American CEOs or entrepreneurs criticize China.
- The SEC is finally acting. News has broke the SEC will not allow anymore Chinese IPOs without disclosure of the CCP’s control. Every company in China is subject to control by the CCP. You either comply or you are sent to a camp. You also have the threat of delisting because of the Holding Foreign Companies Accountable Act.
See also Investor Leon Cooperman says the US is going through a 'textbook' financial crisis and the S&P 500 won't hit a new high for a long time.
At this point China has pissed off pretty much the entire US. From crashing internet money, to stocks, and don’t forget about their lies about COVID. I can’t imagine investors will bid up the price of these stocks again. Cut your loses and consider this market dead. Xi is a 1940s German leader reincarnated.
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