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Ride The Bull Short The Bear
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
uncensored
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Posted by uncensored > 2022-01-25 00:26 | Report Abuse
Transactions involving state firms buying into private ones exceeded $20 billion last year, more than double the 2012 level, in industries including financial services, pharmaceuticals and technology, disclosures by publicly traded companies show.
“State-owned enterprises must play a leading role and important influence on the healthy development of private enterprises,” says a new central-government action plan for the next three years, which calls for more mergers between state and private firms.
Beijing OriginWater Technology Co. , a provider of sewage-treatment services that competes with the likes of General Electric Co. , was one of the target firms. It was started in 2001 by Wen Jianping, an engineer who had studied in Australia. He was eager to help clean up China’s polluted water supply and take advantage of the country’s increasingly open business environment.
As demand for water purification grew, Mr. Wen’s business thrived. An initial public offering in 2010 helped turn him into a billionaire. In 2018, he made Forbes magazine’s list of China’s richest people, with a reported net worth above $1.1 billion.
Over time, Mr. Wen took on more risk, pledging his shares to borrow more and finance bigger projects. A government “deleveraging” campaign launched under Mr. Xi to curb excessive risk-taking forced companies to pare back on debt and caused stock markets to swoon, sending the value of Mr. Wen’s shares down. His lenders started calling in loans.
Adding to Mr. Wen’s problems, the government in 2018 started to reverse an initiative that teamed private investors with local governments to build big-ticket infrastructure projects, citing fears of overspending. Companies like Mr. Wen’s were left with unfinished projects and debt that was maturing fast.
A subsidiary of China Communications Construction Co. , a big state contractor for Beijing-led infrastructure projects overseas, swooped in, buying a controlling stake in Beijing OriginWater for more than $440 million. Mr. Wen’s stake was reduced to around 10%, from 23%.
Now, instead of focusing on the domestic market, Beijing OriginWater says it plans to help facilitate the party leadership’s Belt and Road Initiative, a huge infrastructure program promoted by Mr. Xi to pull Asian, European and African nations into Beijing’s orbit.
Several longtime board members were replaced with appointees approved by the State-owned Assets Supervision and Administration Commission, which regulates and holds majority stakes in big state companies, including China Communications Construction.
A notice posted on the website of the company’s regulator late last year, when the China Communications Construction subsidiary began acquiring shares in Beijing OriginWater, lays out qualifications for project managers. Among them: Candidates must disclose their political affiliations and should have “unyielding fighting spirit.”
In response to questions, China Communications Construction described the acquisition of Mr. Wen’s firm as an “alliance of the strong.” Mr. Wen declined to comment.
In an interview with a Chinese weekly, China Times, last year, Mr. Wen likened state companies to trees and private firms to shrubs. “In the future, the trees may become larger and larger, absorbing more soil, water and sunlight,” he said. “The shrubs will be transformed, becoming either a branch on the tree or an herb, and the herb will die.”
Zhuji Water Group Co., a water utility run by a city government in the coastal province of Zhejiang, last year spent $147 million for a 28% stake in Zhejiang Great Southeast Co., a publicly listed plastic-packaging firm, after that firm ran into debt troubles.
The government of Zhuji has been trying to make Zhuji Water a conglomerate of sorts by having the company take over hotels, real estate and other assets. Its acquisition of the Great Southeast is also a way for Zhuji Water to get itself listed, a Zhuji official says.
Most often, though, government officials just want to make sure large private companies are adhering to the state’s goals and policies. To that end, the state is installing more Communist Party committees in corporate offices and encouraging them to play more assertive roles in decision-making.
Sanyue Industrial Co., a private maker of electronics in the southern city of Dongguan, in October formed the first party committee in the company’s 11-year history. It did so after the government told the company it needed to, says company executive Huang Shengying.
The committee, which is made up of five party members who were already working at the company, including two from management, plans to meet often to “study the spirit” of government policies and Mr. Xi’s speeches, Ms. Huang says. “We need to understand the policy better to survive. Party building, we’re told, is good for corporate development.”