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EXPLAINER: Risks underlie tumbling Chinese company shares

EXPLAINER: Risks underlie tumbling Chinese company shares

BEIJING — Foreign shareholders in China’s tech companies are learning what its entrepreneurs have long known: The ruling Communist Party’s decisions about what is good for the economy can hurt your business.The stock prices of internet giants Tencent and Alibaba and ride-hailing service Didi tumbled after President Xi Jinping’s government launched anti-monopoly and data security enforcement actions against them.Also this week, share prices of Chinese education companies fell after news reports that for-profit activity might be banned in core school subjects.The crackdown on some of China’s biggest private sector success stories prompted warnings about a “war on capitalism.” But regulators say the opposite is true. They say they are protecting the public, smaller companies, the financial system and competition.“The crackdowns are positive because they are good for Chinese SMEs,” or the small and medium-size private enterprises that are the bulk of the private sector, Michael Every of Rabobank said in a report.WHY IS THE COMMUNIST PARTY DOING THIS?The ruling party declared anti-monopoly enforcement a priority this year, especially for tech companies that dominate e-commerce, social media and entertainment and are expanding into finance, medical services and other areas.Party leaders worry Tencent Holding Ltd., Alibaba Group and other industry leaders can abuse their dominance to keep out competitors, raise prices or force suppliers to grant them favorable terms, hurting rivals.The ruling party worries about the mountains of information about customers gathered by e-commerce, ride-hailing, social media and other companies.Party leaders also have social goals including shielding children from harmful material online and promoting access to education.WHY ARE SHARE PRICES TUMBLING?The stock market turbulence reflects the gulf between the certainty craved by financial markets and the secrecy used by the ruling party as a tool to control China’s tumultuous private sector.Chinese leaders warned in December a crackdown was coming but said nothing about what activity might be targeted. That shook confidence in Chinese stocks traded in New York, Hong Kong or London.More competition usually leads to lower prices, better service and more economic growth. But for individual companies, shareholders worry competition squeezes profit margins and requires more spending on product development, marketing and other activity.Investors also worry the crackdown is a signal Xi’s government wants to control the companies more tightly, possibly limiting their growth potential.WHICH COMPANIES HAVE BEEN TARGETED?Targets include the biggest companies in their global industries.Alibaba Group, the biggest e-commerce platform by sales volume, was fined a record 18.3 billion yuan ($2.8 billion) in April for tactics that included prohibiting vendors that wanted to sell on Alibaba from dealing with its competitors.Last week, Alibaba was among companies fined for allowing sexually suggestive stickers and other improper content to be circulated to children. Others that were punished include video site Kuaishou, microblog platform Sina Weibo and e-commerce service company Xiaohongshu.Tencent Holding Ltd., a games and social media provider best known abroad as operator of the messaging app WeChat, is one of the world’s 10 most valuable companies, with a stock market capitalization of $680 billion.On Saturday, Tencent was ordered to stop requiring music suppliers to give exclusive access to copyrights. The market regulator said that with 80% of “exclusive music library resources,” Tencent had the power to improperly suppress competition.Tencent promised in a statement to “conscientiously abide by the decision.” That reflects the meekness of even the biggest companies before regulators with the power to shut them down.WHAT IS THE PARTY’S RELATIONSHIP WITH BUSINESS?Chinese leaders promise to support entrepreneurs who generate new jobs and wealth but are determined to keep them under control.The ruling party sometimes lets e-commerce or other promising industries grow for years with little regulation before stepping in to impose rules and stamp out features that don’t suit it.In the most famous example, Alibaba founder Jack Ma in 2004 launched online payments system Alipay despite the lack of any regulations authorizing electronic payments. Ma, one of China’s most successful risk-takers, built a financial giant with hundreds of millions of users and expanded into online banking and other services.That evolved into Ant Group, which was on the verge of a multibillion-dollar stock market debut in November when regulators ordered that suspended and told Ant to improve its protections against financial risk.WHAT ABOUT CUSTOMER INFORMATION?Dozens of companies have been fined and ordered to tighten security for customer information or to collect less.Ride-hailing service Didi Global Inc., whose shares debuted in New York on June 30, was ordered days later to stop signing up new customers while it overhauled data safety. The country’s internet regulator said officials would review its company-wide “network security.”Beijing sees customer data as an economic asset but also a strategic and political weakness if companies or foreign governments can gain insights about the public that the ruling party doesn’t know.Regulators also worry companies might collect too much financial and other personal information about customers that might be stolen.Then-President Donald Trump expressed similar concern last year when he ordered Chinese-owned short video service TikTok to sell its U.S. arm. Trump’s successor, President Joe Biden, hasn’t said what he will do about TikTok.HOW ARE SHARE PRICES AFFECTED?Didi’s share price has fallen 25% since its New York stock market debut June 30, wiping about $20 billion off its total value.Tencent shares in Hong Kong are down 25% from a month earlier. Alibaba’s New York-traded stock is off 19% while online retailer JD.com Inc. is down 17%. Internet search giant Baidu Inc. has declined 22% in U.S. trading.

EXPLAINER: Risks underlie tumbling Chinese company shares

EXPLAINER: Risks underlie tumbling Chinese company shares

BEIJING — Foreign shareholders in China’s tech companies are learning what its entrepreneurs have long known: The ruling Communist Party’s decisions about what is good for the economy can hurt your business.The stock prices of internet giants Tencent and Alibaba and ride-hailing service Didi tumbled after President Xi Jinping’s government launched anti-monopoly and data security enforcement actions against them.Also this week, share prices of Chinese education companies fell after news reports that for-profit activity might be banned in core school subjects.The crackdown on some of China’s biggest private sector success stories prompted warnings about a “war on capitalism.” But regulators say the opposite is true. They say they are protecting the public, smaller companies, the financial system and competition.“The crackdowns are positive because they are good for Chinese SMEs,” or the small and medium-size private enterprises that are the bulk of the private sector, Michael Every of Rabobank said in a report.WHY IS THE COMMUNIST PARTY DOING THIS?The ruling party declared anti-monopoly enforcement a priority this year, especially for tech companies that dominate e-commerce, social media and entertainment and are expanding into finance, medical services and other areas.Party leaders worry Tencent Holding Ltd., Alibaba Group and other industry leaders can abuse their dominance to keep out competitors, raise prices or force suppliers to grant them favorable terms, hurting rivals.The ruling party worries about the mountains of information about customers gathered by e-commerce, ride-hailing, social media and other companies.Party leaders also have social goals including shielding children from harmful material online and promoting access to education.WHY ARE SHARE PRICES TUMBLING?The stock market turbulence reflects the gulf between the certainty craved by financial markets and the secrecy used by the ruling party as a tool to control China’s tumultuous private sector.Chinese leaders warned in December a crackdown was coming but said nothing about what activity might be targeted. That shook confidence in Chinese stocks traded in New York, Hong Kong or London.More competition usually leads to lower prices, better service and more economic growth. But for individual companies, shareholders worry competition squeezes profit margins and requires more spending on product development, marketing and other activity.Investors also worry the crackdown is a signal Xi’s government wants to control the companies more tightly, possibly limiting their growth potential.WHICH COMPANIES HAVE BEEN TARGETED?Targets include the biggest companies in their global industries.Alibaba Group, the biggest e-commerce platform by sales volume, was fined a record 18.3 billion yuan ($2.8 billion) in April for tactics that included prohibiting vendors that wanted to sell on Alibaba from dealing with its competitors.Last week, Alibaba was among companies fined for allowing sexually suggestive stickers and other improper content to be circulated to children. Others that were punished include video site Kuaishou, microblog platform Sina Weibo and e-commerce service company Xiaohongshu.Tencent Holding Ltd., a games and social media provider best known abroad as operator of the messaging app WeChat, is one of the world’s 10 most valuable companies, with a stock market capitalization of $680 billion.On Saturday, Tencent was ordered to stop requiring music suppliers to give exclusive access to copyrights. The market regulator said that with 80% of “exclusive music library resources,” Tencent had the power to improperly suppress competition.Tencent promised in a statement to “conscientiously abide by the decision.” That reflects the meekness of even the biggest companies before regulators with the power to shut them down.WHAT IS THE PARTY’S RELATIONSHIP WITH BUSINESS?Chinese leaders promise to support entrepreneurs who generate new jobs and wealth but are determined to keep them under control.The ruling party sometimes lets e-commerce or other promising industries grow for years with little regulation before stepping in to impose rules and stamp out features that don’t suit it.In the most famous example, Alibaba founder Jack Ma in 2004 launched online payments system Alipay despite the lack of any regulations authorizing electronic payments. Ma, one of China’s most successful risk-takers, built a financial giant with hundreds of millions of users and expanded into online banking and other services.That evolved into Ant Group, which was on the verge of a multibillion-dollar stock market debut in November when regulators ordered that suspended and told Ant to improve its protections against financial risk.WHAT ABOUT CUSTOMER INFORMATION?Dozens of companies have been fined and ordered to tighten security for customer information or to collect less.Ride-hailing service Didi Global Inc., whose shares debuted in New York on June 30, was ordered days later to stop signing up new customers while it overhauled data safety. The country’s internet regulator said officials would review its company-wide “network security.”Beijing sees customer data as an economic asset but also a strategic and political weakness if companies or foreign governments can gain insights about the public that the ruling party doesn’t know.Regulators also worry companies might collect too much financial and other personal information about customers that might be stolen.Then-President Donald Trump expressed similar concern last year when he ordered Chinese-owned short video service TikTok to sell its U.S. arm. Trump’s successor, President Joe Biden, hasn’t said what he will do about TikTok.HOW ARE SHARE PRICES AFFECTED?Didi’s share price has fallen 25% since its New York stock market debut June 30, wiping about $20 billion off its total value.Tencent shares in Hong Kong are down 25% from a month earlier. Alibaba’s New York-traded stock is off 19% while online retailer JD.com Inc. is down 17%. Internet search giant Baidu Inc. has declined 22% in U.S. trading.

Global stocks mixed after Wall St pulls back from record

Global stocks mixed after Wall St pulls back from record

Global stocks and U.S. futures are mixed after Wall Street pulled back from a recordBy JOE McDONALD AP Business WriterJuly 28, 2021, 9:17 AM• 3 min readShare to FacebookShare to TwitterEmail this articleBEIJING — Global stock markets were mixed Wednesday after Wall Street pulled back from a record as investors awaited a Federal Reserve report for signs of when U.S. stimulus might be withdrawn.Investors also were uncertain how much farther China will go with a regulatory crackdown that set off a slide in its internet share prices.London and Frankfurt opened higher while Shanghai and Tokyo declined. U.S. futures were mixed.Investors were looking for an update from a Fed board meeting that began Tuesday on when the U.S. central bank might start to reduce bond purchases that inject money into financial markets and keep interest rates low.“A few winds are blowing against a tapering statement,” said Jeffrey Halley of Oanda in a report, “not least the delta variant sweeping the Asia Pacific with an inevitable knock-on to its recovery.”In early trading, the FTSE 100 in London gained 0.1% to 7,003.94 while the DAX in Frankfurt added 0.2% to 15,558.43. The CAC 40 in Paris rose 0.7% to 6,575.65.On Wall Street, the future for the benchmark S&P 500 index was up 0.2% while that for the Dow Jones Industrial Average was off less than 0.1%.On Tuesday, the S&P 500 fell 0.5% while the Dow dropped 0.2%. The Nasdaq lost 1.2%.Investors were digesting U.S. earnings reports while growth worries increased after the Centers for Disease Control and Prevention recommended even vaccinated people return to wearing masks indoors in areas where the coronavirus’s more contagious delta variant is spreading.In Asia, the Shanghai Composite Index lost 0.6% to 3,361.59, declining for a third day, while the Nikkei 225 in Tokyo fell 1.4% to 27,581.66. The Hang Seng in Hong Kong gained 1.5% to 25,473.88.The Kospi in Seoul lost 0.1% to 3,236.86. Sydney’s S&P-ASX 200 gave up 0.7% to 7,379.30.India’s Sensex lost 0.4% to 52,383.14. New Zealand gained while Southeast Asian markets declined.Shares in Chinese internet giants slid for a third day as investors waited for possible new action after Beijing stepped up anti-monopoly and data security enforcement against the industry. They were reported to be considering restrictions on for-profit education ventures.Games and social media giant Tencent Holding Ltd. was up 0.3% in Hong Kong, though it still is down 25% for the month. E-commerce giant Alibaba Group shares in Hong Kong were up 1.8% but off 15% for the month.In energy markets, benchmark U.S. crude rose 43 cents to $72.08 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude oil, the basis for international oil prices, advanced 38 cents to $73.90.The dollar advanced to 109.92 yen from Tuesday’s 109.72 yen. The euro rose to $1.1824 from $1.1786.

China's Tencent ordered to end exclusive music contracts

China's Tencent ordered to end exclusive music contracts

Chinese regulators have ordered internet giant Tencent to end exclusive contracts with music copyright holdersBy JOE McDONALD AP Business WriterJuly 24, 2021, 3:36 AM• 2 min readShare to FacebookShare to TwitterEmail this articleBEIJING — Internet giant Tencent was ordered by regulators to end exclusive contracts with music copyright holders, adding to increased enforcement of anti-monopoly and other rules as Beijing tightens control over booming online industries.Tencent controls more than 80% of “exclusive music library resources” following its 2016 acquisition of China Music Group, the State Administration for Market Regulation said Saturday. It said that gives Tencent the ability to get better terms than competitors receive or to limit the ability of rivals to enter the market.Tencent Holdings Ltd., best known abroad for its WeChat messaging service, has a sprawling business empire that includes games, music and video. It is among the world’s 10 most valuable publicly traded companies, with a stock market value of $680 billion.In order to “restore market competition,” Tencent must end exclusive music copyright contracts within 30 days, the market regulator said in a statement. The company is barred from requiring providers to give better terms than competitors receive.Tencent promised on its social media account to “conscientiously abide by the decision.”Regulators are stepping up enforcement of anti-monopoly, data security, financial and other rules against Tencent, e-commerce giant Alibaba Group and other companies that dominate entertainment, retail and other industries.The enforcement has hurt the stock market value of some companies. Shares in ride-hailing service Didi Global Inc., which made its U.S. stock market debut last month, are down 21% after regulators announced a probe of its “network security” and ordered the company to overhaul handling of customer data.Regulators have publicly warned major companies not to use their market dominance to keep out new competitors.Tencent was blocked by regulators on July 10 from combining its game platforms Douyu and Huya on the grounds that might reduce competition.On Wednesday, the Chinese internet regulator reprimanded Tencent, Alibaba, microblog platform Sina Weibo and e-commerce service Xiaohongshu for allowing sexually suggestive stickers or short videos of children to be distributed on their services.———AP researcher Henry Hou contributed to this report.

Global markets follow Wall St higher as virus fears recede

Global markets follow Wall St higher as virus fears recede

Global stock markets have followed Wall Street higher for a second day as optimism about a global economic recovery appears to be outweighing concern over rising coronavirus casesBy JOE McDONALD AP Business WriterJuly 22, 2021, 9:38 AM• 3 min readShare to FacebookShare to TwitterEmail this articleBEIJING — Global stock markets followed Wall Street higher Thursday for a second day as optimism about an economic recovery appeared to outweigh concern over rising coronavirus cases and inflation.Market benchmarks in Frankfurt, Shanghai and Hong Kong advanced. London opened down less than 0.1%. Japanese markets were closed for a holiday.Wall Street futures rose after the S&P 500 index climbed 0.8% overnight. That put it on track for a weekly gain after rebounding from Monday’s 1.6% loss.Investors are wavering between optimism about a global recovery and unease that it might be delayed by the spread of the virus’s more contagious delta variant. They also worry central bankers might feel pressure to tame rising inflation by rolling back easy credit.“The delta variant remains an ever-present downside risk for the markets in the near-term,” said Craig Erlam of Oanda in a report, “but as long as inflation remains only a temporary problem, it also keeps central bank hawks at bay.”In early trading, the DAX in Frankfurt rose 0.9% to 15,558.70 and the CAC 40 in Paris was 0.6% higher at 6,504.94. The FTSE 100 in London shed less than 0.1% to 6,995.42.On Wall Street, futures for the S&P 500 index and the Dow Jones Industrial Average were up 0.1%.The S&P 500’s rise Wednesday was driven by tech stocks, banks and companies that rely on consumer spending. Energy stocks also rose as the price of U.S. crude oil marched higher. Utilities and real estate stocks were among the decliners.The Dow gained 0.8% and the Nasdaq composite added 0.9%.In Asia on Thursday, the Shanghai Composite Index rose 0.3% to 3,574.73 and the Hang Seng in Hong Kong surged 1.8% to 27,723.84.The Kospi in Seoul added 1.1% to 3,250.21 and the S&P-ASX 200 in Sydney rose 1.1% to 7,386.40.India’s Sensex advanced 1.2% to 52,793.16. New Zealand and Southeast Asian markets gained.U.S. stocks, boosted by unexpectedly strong corporate profit reports, have gained in choppy trading despite coronavirus uncertainties.More than 80% of companies in the S&P 500 that reported results so far have beaten analysts’ forecasts, according to FactSet. More than 100 are due to announce next week.In energy markets, benchmark U.S. crude rose 40 cents to $70.70 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.88 on Wednesday to $70.30. Brent crude, used to price international oils, added 33 cents to $72.56 per barrel in London. It advanced $2.88 the previous session to $72.23.The dollar gained to 110.32 from Wednesday’s 110.28 yen. The euro declined to $1.1788 from $1.1799.

Global stock markets mostly higher after Wall Street rebound

Global stock markets mostly higher after Wall Street rebound

Global stock markets have advanced after Wall Street rebounded and Japan reported stronger exports than expectedBy JOE McDONALD AP Business WriterJuly 21, 2021, 8:56 AM• 2 min readShare to FacebookShare to TwitterEmail this articleBEIJING — Global stock markets advanced Wednesday after Wall Street rebounded as investors tried to figure out how increasing coronavirus cases will affect the global economy.London and Frankfurt opened higher while Shanghai, Tokyo and Sydney advanced. Hong Kong and Seoul declined.Investor optimism has been buoyed by higher U.S. corporate profits despite a rise in cases of the virus’s more contagious delta variant.Overnight, Wall Street’s benchmark S&P 500 index gained 1.5%, recovering much of the previous day’s loss.“Defensive flows eased. However, gains are likely to be capped by lingering concerns over COVID-19′s delta variant,” Anderson Alves of ActivTrades said in a report. “A new wave of infections could delay the reopening of global economies.”In early trading, the FTSE 100 in London surged 1.6% to 6,989.90 while the DAX in Frankfurt rose 0.7% to 15,322.69. The CAC in Paris jumped 1.4% to 6,438.83.On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were up 0.7%.On Tuesday, the Dow and the Nasdaq composite both gained 1.6%.In Asia, the Nikkei 225 in Tokyo rose 0.6% to 27,548.00 after Japan’s June exports jumped 48.5% over a year earlier, beating forecasts.The Kospi in Seoul shed 0.5% to 3,215.91 after South Korea reported a daily high of 1,784 new coronavirus cases.The Shanghai Composite Index rose 0.7% to 3,562.66 while the Hang Seng in Hong sank 0.1% to 27,1224.58.Sydney’s S&P-ASX 200 advanced 0.8% to 7,308.70 after Australian retail sales rose 1.3% over a year earlier in the three months ending in June.New Zealand and Southeast Asian markets gained. Indian markets were closed for a holiday.The U.S. market has gained ground in choppy trading despite uncertainty about the lingering impact of the virus on business activity and inflation.The U.S. Centers for Disease Control has said an estimated 83% of U.S. cases are tied to the delta variant.Investors have been encouraged by quarterly results that show many companies are increasing profits.In energy markets, benchmark U.S. oil rose 96 cents to $68.16 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oils, added 96 cents to $70.31 per barrel in London.The dollar gained to 110.13 yen from Tuesday’s 109.83 yen. The euro fell to $1.1777 from $1.1783.

China says US measures on Xinjiang threaten global trade

China says US measures on Xinjiang threaten global trade

China’s government has rejected U.S. accusations of forced labor in Xinjiang and accused Washington of hurting global tradeBy JOE McDONALD AP Business WriterJuly 15, 2021, 10:17 AM• 2 min readShare to FacebookShare to TwitterEmail this articleBEIJING — China’s government rejected U.S. accusations of forced labor in Xinjiang and accused Washington on Thursday of hurting global trade after lawmakers endorsed import curbs and American companies were warned they face legal risks if they do business with the region.The measures add to rising pressure on companies that buy clothing, cotton, tomatoes and other goods from Xinjiang, where the ruling Communist Party is accused of holding more than 1 million members of mostly Muslim ethnic groups in detention camps. Washington has blocked some imports, while Beijing has whipped up Chinese consumer anger at brands that express concern about possible forced labor.“The so-called human rights and forced labor issues in Xinjiang are completely inconsistent with the facts,” said a Ministry of Commerce spokesman, Gao Feng.“The U.S. approach has seriously undermined the security and stability of the global industrial chain and supply chain,” he said. “China firmly opposes it.”Gao gave no indication of possible Chinese retaliation.The latest measure approved Wednesday by the U.S. Senate would block imports of goods made with forced labor in Xinjiang. The bill requires approval from the House of Representatives.On Tuesday, the Commerce Department and five other agencies warned companies with ties to the region they “run a high risk” of violating U.S. laws against forced labor.In unusually forceful language, they said Beijing carries out “genocide and crimes against humanity” in Xinjiang including imprisonment, torture, rape, forced sterilization, forced labor and “draconian restrictions” on movement and religion.Chinese officials deny accusations of abuses in Xinjiang. They say the camps are for job training and combating radicalism.Washington and the European Union have imposed travel and financial sanctions on Chinese officials accused of abuses in Xinjiang. The United States has blocked imports of cotton, tomatoes and materials to make solar panels from companies suspected of using forced labor.Beijing retaliated by announcing unspecified penalties against American and European officials, a European think tank and two European researchers who study Xinjiang.State TV called for a boycott of Swedish retailer H&M after it joined other brands in expressing concern about reports of forced labor in Xinjiang. State media have publicized calls by individual Chinese for boycotts of Nike, Adidas, Uniqlo and other global shoe and clothing brands.———U.S. business advisory: www.state.gov/xinjiang-supply-chain-business-advisory/

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