At a panel discussion of the recently concluded Central Economic Work Conference, Yi Huiman, Chairman of the China Securities Regulatory Commission (CSRC), delivered a bullish outlook for China’s A-share and IPO markets for 2021.
But that bullish outlook did not extend to China’s behemoths in the tech sector and, as we had warned (see SGH 11/13/2020; “ China: Breaking the Internet Monopolies”), last night regulators launched an anti-monopoly investigation into tech giant Alibaba and summoned its fintech Ant affiliate in for regulatory review.
** At that CEWC meeting, Premier Li Keqiang added context to Beijing’s efforts to rein in these monoliths, saying: “Financial innovation must be carried out under the premise of ample prudent administration. If a single digital financial technology (fintech) platform takes up too large of a market share, it may eventually lead to a large number of bad loans. We have to avoid allowing financial platforms from becoming too-big-to-fail and prevent the monopoly of a winner take all in the market.”
** A senior policymaker added the following comments – including his own views — on background:“ It is time to strengthen anti-trust regulations in the financial technology sector. Based on what we know so far, the problems of large financial platforms are more serious than we had previously known. Finance is the lifeblood of our country. We need to stop fintech giants, such as Alibaba, Tencent, JD and Meituan, which were already fighting off rivals that were taking their market share, [from gaining monopoly position]. Frankly, [I do not believe regulators] will allow Ant Group and similar companies to IPO in 2021.”
** The drive to rein in the tech giants is accompanied and is indeed perhaps only made possible under the backdrop of a bullish outlook from Beijing’s top leadership for China’s economy and stock markets. In CSRC Chairman Yi’s earlier comments, he noted the cumulative net inflow of foreign capital into China’s A-share market was likely to hit 200 billion yuan this year and predicted those inflows to increase by around 50 billion next year to 250 billion yuan. Furthermore, Yi predicted that the 389 A-share IPO listings this year, up by 94% over 2019 and raising a total of 479 billion yuan, would grow to 500-540 listings in 2021 with the return of more “red chip” companies and the implementation of stricter delisting regulations.
** As to public sector investments, the “national team” will look to invest particularly in companies that have been put on the US “entity list” since the Sino-US trade wars began, especially those that were listed this year. Sources in Beijing maintain that those companies “represent the development direction and are the backbone of China’s high technology,” and defiantly predict that not a single one of the companies targeted by the US “entity list” will go bankrupt.
** Furthermore, sources expect the national team to invest heavily in the leading companies in ten key sectors highlighted in the “Made in China 2025” and “14thFive-year” plans, especially centrally administered SOEs and promising private high-tech enterprises. These companies are expected to receive strong financial and tax support from the government in 2021, and throughout the 14thFive-year Plan period.
** As to the direction of overall markets, Yi Huiman, from what we understand, predicted at the CEWC meeting that the Shanghai Composite Index will grow by at least 10% next year. That, of course, will be up to markets to decide — with the not-so-invisible hand of Beijing firmly behind.