SINOWEEKLYPLUS

Wang Qishan isn’t an “old comrades”; decoding the censuring of ex-“internet czar” Lu Wei

SinoInsight 1
Evergrande Group, one of China’s ten largest property developers, is selling many apartments at a 12 percent discount from Feb. 2 to Feb. 28.

OUR TAKE
1. The Xi Jinping administration is carrying out financial deleveraging to fend off systemic risks. The deleveraging measures greatly impact the property industry, and developers are seeking to recover funds in an environment of shrinking liquidity.

2. Xu Jiayin, the founder of Evergrande Group, is closely associated with the family of Zeng Qinghong, the Jiang faction number two. Following the arrest of tycoon Xiao Jianhua in January 2017, there has been speculation that Xi’s anti-corruption campaign may target Xu.

3. We believe that Xu may be worried that Evergrande, like Wang Jianlin’s Wanda Group and Wu Xiaohui’s Anbang Group, could be targeted next as part of the Xi leadership’s effort to clean up the financial sector. Therefore, Xu is now selling property at a discount to reduce his company’s debt ratio.

SinoInsight 2
British Defence Secretary Gavin Williamson announced on Feb. 13 that a British warship will sail through the South China Sea to assert freedom-of-navigation rights. Britain is the fourth Western country after America, Australia, and France to carry out freedom-of-navigation operations in the South China Sea.

OUR TAKE
1. President Donald Trump has expressed his opposition to communism in speeches at home and abroad. Trump’s national security strategy also seeks to counter Chinese Communist Party subversion and expansionism. In considering the increased scrutiny of and countermeasures against CCP action by several countries (Australia, Britain, Germany, etc.) since Trump took office, the Trump administration’s tough stance against the CCP could be inspiring the formation of a global anti-communist coalition.

2. Should North Korea continue with its nuclear testing, the probability of the United States going for the military option once preparations are complete will increase. (See “What Would Happen if China Dumped North Korea?”)

3. Given the looming U.S.-China trade war, investors should exercise prudence when investing in China because the CCP could be looking for ways to prevent capital outflows.

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