(CNOOC), the largest offshore oil and gas producer in mainland China, was delisted and suspended from trading by the New York Stock Exchange on March 9, 2021, with a specific delisting date yet to be announced. This is another strike against Chinese stocks after the NYSE delisted China Telecom, China Mobile and China Unicom in January.
These Chinese companies were sanctioned by the U.S. government for being on the military-related blacklist, and the market expects more Chinese companies to face the fate of delisting.
From November last year to January 14 this year, the U.S. government has issued three blacklists of “Chinese Communist Party military companies” and has now blacklisted 44 Chinese companies. The U.S. accused the blacklisted Chinese companies of supporting the Chinese Communist Party’s military ambitions and demanded that Americans be barred from investing in them.
While the U.S. stock market has been delisting Chinese stocks, more Chinese companies are flocking to the U.S. capital market.
According to a February report by The Wire China, 35 Chinese companies listed on the New York Stock Exchange and Nasdaq last year, a 10-year high.
According to StockMarketMBA.com (raw data), as of March 18, 2021, there are at least 238 Chinese stocks listed on U.S. exchanges (including ADRs), with a total market capitalization of about $1.9 trillion.
Among them, Hony Capital, a private equity giant with strong ties to the authorities, listed on the Nasdaq last year through Blank Check Company, representing a recent trend of Chinese companies going to the U.S. for money. According to “The Wire China,” four Chinese companies raised money in the U.S. through “blank check companies” last year.
“Hony Capital” to go public in the U.S. to invest in Chinese Communist Party military and 5G
Reuters reported on Feb. 24 (Original post) that Hony Capital is planning to raise $300 million in the U.S. through a special purpose acquisition company (SPAC) listing on the Nasdaq, targeting companies from sectors such as healthcare and consumer goods that have significant business ties to China. The target companies will come from sectors such as healthcare and consumer products with significant business partnerships in China.
“Hony Capital, a subsidiary of Legend Holdings, was founded in 2003 and is a leading private equity firm in mainland China, known for its preference for investing in state-owned enterprises, particularly in “national investment areas” such as 5G and military industries set by the Chinese Communist Party.
Lenovo Holdings is part of the Chinese Academy of Sciences. Unlike the national academies of science in free countries such as the United States, CAS is not a private academic institution, but a Communist Party-controlled national research institution that directly serves the Communist Party’s scientific and military purposes.
On September 16, 2020, CAS President Bai Chunli (second from left) said at the State Council’s first phase of the “Pioneering Action” conference that he would deploy efforts to tackle “neck-cutting” areas such as lithography. (Screenshot from the official website of the State Council of the Communist Party of China)
In response to the U.S. sanctions against huawei and other military-related Chinese companies for cutting off their cores, CAS President Bai Chunli said at a press conference of the State Council on Sept. 16 last year that CAS had implemented the “pioneering action” in 2018, and had launched three special projects in the first phase, including supercomputing systems, cyber security and submarine vehicles, and five special projects in 2019. The first phase has been launched supercomputing system, cyber security, submarine 3 special projects, 2019 has started 5 special projects, such as chips, and will be on lithography and other “neck” areas.
Bai Chunli stressed that CAS will be closely integrated with the layout of the 14th Five-Year Plan, and has achieved leading results in quantum technology, Beidou satellite, lunar exploration project and other key projects of the CPC.
“Hony Capital has listed “state-owned enterprise reform” as one of the priorities of its private equity investment business on its official website, claiming that “Hony Capital specializes in investments in the field of state-owned enterprise reform” and has participated in Hony Capital has participated in the restructuring of 33 state-owned enterprises, including China Glass and Zoomlion Heavy Industry Co.
Hony Capital has listed “SOE reform” as one of the priorities of its private equity business. (Screenshot from Hony Capital’s website)
According to its official website, Hony Capital currently manages a total of more than RMB 80 billion in capital and has a total asset value of about RMB 2.9 trillion in portfolio companies.
According to a November 7, 2018 report by the mainland media Shanghai Securities News (original article), Hony issued an announcement in early November of that year, setting its first public offering to “invest in state-owned enterprises”.
In November 2018, Guo Wen, then general manager of Hony’s fund, told Shanghai Securities News that Hony was optimistic about investing in 5G and military industry. (Screenshot from the official website of Shanghai Securities News)
“Over the past 15 years, Hony has participated in 38 projects in 33 state-owned enterprises, with an investment amount of more than 19 billion yuan,” said Guo Wen, then general manager of Hony’s fund company “Hony Yuanfang,” who was bullish on 5G, military industry and other national investment fields.
Since last year, the Chinese Communist Party’s “connected households” rush to run SPAC to the United States to circle money
The full name of SPAC is “Special Purpose Acquisition Companies” (SPAC), which is developed from the “Blank Check” M&A companies in the U.S. stock market in the 1980s. SPACs were developed from the Blank Check Acquisition Company (BCA) in the 1980s.
The SPAC sponsor is not a business entity, but a shell company (Blank Check Company) that goes public to raise capital with the promise to investors that it will acquire a physical company by issuing additional shares after the IPO.
SPAC is different from the mainstream IPO (initial public offering) and “shell listing”, both of which raise capital through an entity, and even the shell company is a poorly run entity; while SPAC is a shell listing, the process is simple, the cost is very low, and the financing is guaranteed, equivalent to a private fund public offering.
According to a March 8 report by the Chinese media Caixin Weekly (original article), the U.S. has seen a boom in SPACs in recent years, with many investment companies with close ties to the Chinese Communist Party, including Hony, flocking to the U.S. to raise money through SPACs.
For example, in January this year, the SPAC launched by Chunghwa Capital Chairman Hu Zuliu completed its IPO, raising US$360 million; in February, the SPAC launched by Houpao Investment Chairman Fang Fenglei and others completed its IPO, raising US$414 million; and CITIC Capital (CITIC) completed its IPO, raising US$2.5 billion. “SPAC, which was established by CITIC Capital in 2020, has not only completed its IPO on the New York Stock Exchange, raising US$280 million, but is also rumored to have found potential M&A targets.
According to the mainland media, from Hony Capital and Chunhua Capital to Hupo Capital and CITIC Capital, all of these companies are deeply involved in the acquisition of Chinese companies. All of these companies are deeply involved in investments in mainland China and have close ties to top Communist Party officials.
The Voice of America reported on March 5 (original post) that Hony’s U.S. IPO through SPAC would bypass U.S. government scrutiny and “could bring Chinese capital risks into the U.S. market, and could introduce ideological issues.
According to Caixin Weekly, the number of annual SPAC listings in the U.S. stock market has long been in double digits, but suddenly surged to 248 in 2020, with a spurt of SPAC increases into 2021; by the end of February, the number of SPAC listings in the U.S. stock market had reached 201.
Record number of Chinese stocks to the U.S. in 2020 circles U.S. money to invest in CCP’s “14th Five-Year Plan”
According to a Voice of America report on Feb. 24 (original article), 32 Chinese companies raised more than $12 billion in U.S. IPOs in 2020, the most in a decade and four times as many as in 2019. Nine more Chinese companies came to the U.S. this year through mid-February, raising $2 billion in IPOs.
The Nasdaq Composite Index soared to a new closing record as exchange salesmen cheered loudly. ( EMMANUEL DUNAND/AFP)
According to “The Wire China” on Feb. 14 (original article) and Feb. 28 (original article), a total of 26 Chinese companies listed on the Nasdaq last year, and nine others listed on the New York Stock Exchange.
It is worth mentioning that, in addition to the aforementioned blank check listings, many Chinese companies have raised funds from the U.S. capital markets to invest in key projects in the Communist Party’s 14th Five-Year Plan, such as science and technology or military projects.
According to “The Wire China,” of the 35 Chinese companies that will raise capital through IPOs in the U.S. in 2020, at least eight of them are in the “frontier areas of science and technology” and “key industries of the digital economy” identified in the CCP’s 14th Five-Year Plan. The “digital economy key industries”.
All eight IPOs were listed on NASDAQ, including.
Screenshot of the “14th Five-Year Plan” column of the Communist Party of China (CPC) .
I-MAB, which is engaged in the treatment of tumor immunity and autoimmune diseases, raised $104 million in January 2020 – in the 14th Five-Year Plan “Gene and Biotechnology” frontier area.
(2) LIZHI, an online audio content platform specializing in fully automated AI content distribution using big data and artificial intelligence; $45.1 million in January 2020 – part of the 14th Five-Year Plan’s focus on artificial intelligence.
- AnPac Bio-Medical, $16 million in January 2020 – in the 14th Five-Year Plan’s “Genetics and Biotechnology” frontier sector.
The 14th Five-Year Plan of the Communist Party of China (CPC) column .
- Beijing WIMI Hologram Cloud, China’s largest holographic cloud platform, raising $32.5 million in April 2020 – in the 14th Five-Year Plan “Virtual Reality and Augmented Reality” key industry.
Kingsoft Cloud, Kingsoft’s Cloud Computing service platform, raising $510 million in May 2020 – part of the 14th Five-Year Plan’s “Cloud Computing” focus industry.
- Burning Rock Biotech, a tumor precision Medicine and cancer early detection company, raising $223 million in June 2020 – part of the 14th Five-Year Plan “Genetics and Biotechnology” frontier.
- Genetron, a fast-growing cancer precision medicine company in China, raising approximately $260 million in June 2020 – part of the 14th Five-Year Plan “Genetics and Biotechnology” frontier.
- Agora, a mobile audio and video real-Time transmission cloud service company, $350 million in June 2020 – part of the 14th Five-Year Plan “Cloud Computing” focus area.
The motivation of Chinese private equity firms, which have been suddenly enthusiastic about SPACs since last year, has also raised concerns about their motivation for going public in the United States.
The Voice of America reported on March 5, quoting investment sources as saying that Hony Capital has been able to attract many major investors from Home and abroad because of its ties to the Chinese Communist government, and that “after the IPO, Hony may use U.S. funds for large Chinese state-owned enterprises, and will also bypass restrictions on investment in China’s military industry through the capital channel. restrictions on investment in China’s military industry”.
U.S. Steps Up Purge of Blacklisted Chinese Companies Chinese stocks may become last hurrah
On March 19, 2021, the U.S. Congress’ U.S.-China Economic and Security Assessment Commission (USCC) held a hearing focusing on the risks of investing in China. The meeting discussed the high risks of investing in mainland China under Communist rule and focused on hot issues such as the listing of Chinese companies in the U.S. and the U.S. government’s restrictions on Chinese investment.
On March 12, the Federal Communications Commission (FCC) again blacklisted Huawei as a telecommunications equipment company that could threaten U.S. national security. the FCC’s latest decision is seen by outsiders as a continuation of the Biden administration’s hard-line policy against Chinese Communist companies such as Huawei during the Trump era.
Three companies, China Mobile, China Telecom and China Unicom, are linked to the Chinese Communist Party’s military and were delisted by the New York Stock Exchange. (STR/ AFP)
From November last year to January 14 this year, the U.S. government has issued three blacklists of “Chinese Communist Party military companies”, temporarily listing 44 Chinese companies. So far, four Chinese companies, including China Mobile, China Unicom, China Telecom and CNOOC, have been delisted from the U.S. market.
As of March this year, more than 20 Chinese stocks have been removed from the S&P Dow Jones, MSCI, FTSE Russell and other major global indices in compliance with the U.S. government’s blacklisting sanctions against Chinese military companies.
In 2020 under the Trump Administration, the U.S. Congress passed the Foreign Company Accountability Act, which would prohibit foreign companies that fail U.S. accounting reviews or are controlled by foreign governments from listing in the United States.
The Act is widely seen as targeting Chinese companies listed in the U.S. (Chinese stocks), which are seen as being under the tight control of the Chinese Communist regime and are not subject to the same scrutiny by the U.S. Public Company Accounting Oversight Board (PCAOB) as other public companies.
In response to the anomaly of Chinese companies flocking to the U.S. in spite of the tight financial controls and sanctions imposed by the U.S., current affairs commentator Li Linyi analyzed that although the Foreign Company Accountability Act has been passed, it does not apply to companies to be listed in the U.S., and also gives a three-year correction period to non-compliant companies. Moreover, it remains to be seen whether other sanctions orders of the Trump administration will be inherited or implemented by the Biden Administration.
According to Li Linyi, this means that Chinese stocks have several years to raise capital in the U.S. before they are expelled by the Foreign Company Accountability Act or other executive orders; so the current perverse boom in Chinese stocks is likely a result of the CCP’s desire to go to the U.S. to raise money before the guillotine falls and use U.S. capital to support its technology and military industry projects.
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