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I don't know if everyone's following what's going on, but China just pulled the rug out from under a lot of investment firms -- costing pension and hedge funds

• ihsw 5y ago
  It sounds like the managers of the Illinois pension fund have a spending problem rather than a funding problem.
• Invictus0 5y ago
  These investors were foolish to assume China would permit an unregulated free market in the same way the Western world does. I am entirely unsympathetic.
  • ok123456 5y ago
    It's almost as if their system just isn't simply "state capitalism".
  • MichaelZuo 5y ago
    Well to be fair it seems the current administration in the U.S. will not permit an unregulated free market either, in any major industry.
• freeone3000 5y ago
  The Chicago pension fund didn't think a VIE was actually ownership, right? Turns out the thing uses to circumvent capital controls was actually illegal, whoops.
  • refurb 5y ago
    Ha, it’s funny cause it’s true. The risk was always there. The pension fund can’t play dumb. My only question is China apparently doesn’t think it need foreign investment any more? I mean this latest move will scare a lot of foreign investment away (“that’s a nice valuation you have, would be a shame if we made all for-profit companies illegal”). No doubt the Chinese are smart enough to know this so I assume they have enough domestic wealth to supply any capital needs? Still, scaring off the international markets seems like a bad move.
    • refenestrator 5y ago
      China never wanted foreign investment/ownership of their tech companies, that's why this cockamamie scheme with an associated service company listed in NY arose in the first place.
    • ralph84 5y ago
      > My only question is China apparently doesn’t think it need foreign investment any more? China hasn't really needed more foreign investment for quite a while. They get plenty of foreign capital from international trade. What they needed was foreign IP, which they acquired by forcing foreign companies into joint ventures if they wanted access to the Chinese market. Not to mention state-sponsored industrial espionage. At this point it's safe for any foreign investor to assume that any investment proposal in China that doesn't involve the transfer of IP to China is a scam.
  • refenestrator 5y ago
    Reminds me of the people who got mad about the auto bailouts in 08 because the junk bonds they were holding didn't pay out. You bought the bonds! This is on you!
    • nradov 5y ago
      Investors were mad because the auto industry bailouts abrogated normal bankruptcy rules about creditor seniority and gave sweetheart deals to politically favored unions. The federal government changed the rules in the middle of the game.
• alexfromapex 5y ago
  Meanwhile if you go to big US retail stores or shop online, a large majority of the merchandise is Chinese so US retail companies are helping China while China is actively hurting the US. If you don't believe it, try to shop for products that aren't made in China. Here's the data to back it up: https://www.census.gov/foreign-trade/statistics/highlights/toppartners.html https://www.census.gov/foreign-trade/statistics/highlights/t...
  • tomytosian 5y ago
    now its ok to say it right? because the guy who fought against it was deemed a racist for saying it.
    • HelloMcFly 5y ago
      He was deemed a racist for all of his racist behavior. The most positive thing people had to say about his presidency was his efforts to confront China on trade, though the first phase of that trade deal appears to be a failure. I don't know how much blame to assign him personally though, we're not seeing many examples of success to compare it to.
    • AvesMerit 5y ago
      To be clear, that guy was deemed racist for promoting stereotypes from a position of power. There are ways of fighting against CCP / Chinese govt. aggression without resorting to racism
      • tomytosian 5y ago
        sure. he was deemed a racist for saying china is responsible for the virus and was countered by politicians who willingly infected people with covid by pushing them to go to superspread events from chinatown parades to BLM riots.
        • deleted 5y ago
          [deleted]
• 3pt14159 5y ago
  This has been building for at least 5 years, but it's obvious now that the West needs to start acting. We didn't win the cold war by pretending it wasn't going on and China has certain advantages that we don't have. We have to coordinate on two separate levels that they do not. First, at the state level, where the game theory goes against us because it's typically rival factions (Democrats vs Republicans) and second at the alliance level where we need to coordinate between only semi-aligned nations. We have some advantages, like our lead in technology, but few of them are natural advantages. So I actually think we're the long term losers of the second cold war. Especially if we try to ignore it as it starts.
  • BitwiseFool 5y ago
    >"like our lead in technology" True, and I don't know how much longer this can last. As an example, the rise of TikTok has certainly taken me by surprise. I've always seen world-class social media apps as a Silicon-Valley thing, something that only the US managed to produce. But now, not so much.
    • mensetmanusman 5y ago
      TikTok is Vine 2.0, surprised it didn’t happen in the west as well.
      • BitwiseFool 5y ago
        I still don't understand why Vine went away. It seemed to be doing so well.
        • mensetmanusman 5y ago
          6s was the wrong choice for max length.
          • worker767424 5y ago
            A surprising number of consumer startups are the same as another product, but with different business logic. Just look at Bumble.
• magpi3 5y ago
  > not only has billions of U.S. dollars just went to China without anything in return Genuine question: doesn't Chinese crackdown on its tech industry and private education industry have a greater impact on Chinese people (who are also investors) than it does Americans? Your post seems to imply that both actions were designed almost specifically to harm American pension and hedge funds. I would think that is just a side effect of the real goal (whatever that exactly is). I am in China currently, but I am as ignorant of the underlying motives behind the crackdowns. I just know some Chinese friends involved in after school education (which is a huge market here) who are worried right now. I do believe it is possible, however, that the crackdown on private education is because of the pressure that kids are put on over here. But maybe it's naive of me to think that.
  • ajross 5y ago
    Exactly. There's a myopia here: people[1] prone to imagine global geopolitics as a zero sum war between superpowers imagine ever action by the superpower they're unfamiliar with as some kind of targetted attack. But the PRC government doesn't see it like that. Historically, they are far, far more vulnerable to their own people than they are to the US, which at the end of the day just wants to buy cheap junk and sit around streaming movies. So if I see the CCP moving against financial interests inside China, I'm going to assume that they view those financial interests as the threat they're trying to control. [1] And there are a LOT of such people here on HN.
  • philliphaydon 5y ago
    This is my opinion: but my belief is that the crackdown on education is not about the health and well-being of children, it’s 2 different reasons. 1) it’s crazy expensive to have kids in china now. This is putting off people from having kids. Removing the one child policy hasn’t helped the birth rate and with a growing aging population, china needs more people to have kids. Removing things that cause having kids to be expensive will (their hope) make couples want to have kids. 2) the last couple of generations have worked their butt off to put their kids in higher education for the dream of a better life and a white collar job. Recently they tried to merge schools which would make some degrees useless and force graduates into blue collar jobs. After the recent protests the merging of schools got scrapped. I believe this move is a stepping stone to try and prevent some people from progressing to degrees and force more people into blue collar jobs and keep their manufacturing industry alive.
• cryptonector 5y ago
  > This economic war is accelerating. Surprise. Meanwhile the U.S. has no will to change anything. The current global mercantilist scheme is not a good thing.
• polskibus 5y ago
  If true (can't access the second link), it didn't have much effect on top stock market indexes. Most of them are either at ATH or near it.
• screye 5y ago
  The US has been a spectator for 30 years, as the CCP has kept up an onslaught of economic attacks on the US. The ban on Huawei was a good 1st step, which should be followed with an protectionist approach to trade with China. (as long as it refuses to act in good faith with the US.) It will affect the US economy in the short term, but the US has felt like a frog being slow boiled for the last 30 years. The CCP is now accelerating because they finally have the leverage to twist the US's arm in economic retaliation. Globalist trade is based around bi-directional open channels. The way the west has resigned multiple industrial disciplines to China, cannot be defended under any economic school of thought. Post WW2 America knew what was up. They knew to export low-margin industries to nations they could tie up in stringent trade rules and had the militaristic asymmetry to enforce said rules. (They weren't necessarily unfair either) With Africa, India and SEA being at the point of 1980s China, now is the time to pump some money and get large-scale low-cost manufacturing setup in these nations. It would be a win-win arrangement of monumental proportions. It helps that some of these countries are either deeply suspicious or are already in an exploitative neo-colonialist arrangement with China, making them willing to look at alternatives. (I do not mean doing stupid things like Belt-and-road though) Now like all tug-of-wars of power, this is going to appear quite 'unethical'. But, I can't think of a single instance in history where an 'ethical' player beat a motivated 'hook-or-by-crook' player in a competitive setup. Also, as far as war goes, this is the most peaceful way to engage in it.
  • captainredbeard 5y ago
    Henry Kissinger's foreign policy blunders will be looked back on with the same disdain as Chamberlain's. He set us up for practically all of the FP problems we face today.
  • tablespoon 5y ago
    > The ban on Huawei was a good 1st step, which should be followed with an protectionist approach to trade with China, as long as it refuses to act in good faith with the US. That's a first step, but not a stopping condition, IMHO. I'd say it should continue until there's less ideological conflict (e.g. movement towards political liberalization instead of away from it). > Post WW2 America knew what was up. They knew to export low-margin industries to nations they could tie up in stringent trade rules and had the militaristic asymmetry to enforce said rules. (They weren't necessarily unfair either) More than that, it knew not to become too economically dependent/entwined with ideological opponents. IIRC, there were significant restraints on trade with the Communist Bloc (off the top of my head: CoCom, tying trade policy to human rights (Jackson–Vanik_amendment), and requirements that trade be conducted with hard currency (e.g. no credit)).
• grawprog 5y ago
  I've never understood what business and governments in the west thought was going to happen by investing so heavily in China. Did they really think China would just bend over backwards and take it like every other poor third world country they did this to? Western governments and corporations underestimate China far too much. Western banking dynasties go back a few hundred years, Chinese history and culture is thousands of years old and they operate in time scales of multiple generations. Western bankers and corporations are spring chickens compared to China. China as a country and culture only cares about one thing. Making the entire world an empire for the Han. They see everyone else as inferior, barely human. They will do anything to accomplish this, no matter how long it takes. All these western corporations, investment bankers and governments who think China's the future are right and they're helping them along swimmingly, what they don't realize is, they have no place in the Chinese future and will be discarded.
  • kinghtown 5y ago
    “ China as a country and culture only cares about one thing. Making the entire world an empire for the Han. They see everyone else as inferior, barely human.” Easy does it MAGA. The PRC is a different animal than regular Chinese people.
    • grawprog 5y ago
      Yes, hence why I said as a country and culture and specifically left out the people. The average person. is typically not the one responsible for such decisions. However, China's global ambitions and their xenophobia goes back much further than the PRC.
      • trasz 5y ago
        Global ambitions? Like invading countries and killing millions just to fix the oil price and pump more money into weapon industry?
  • koonsolo 5y ago
    Hindsight is 20/20 of course. I guess they wanted to prevent a 2nd USSR, and thought that stimulating capitalism would also stimulate democracy. Because in the end, let's face it, the real problem is the CCP and not China itself. If China was a democratic country, the threat would be way smaller.
• azth 5y ago
  I'm not sure why this is a surprise to anyone. Hopefully now people are smarter not to invest in China to support the CCP.
• robomartin 5y ago
  > This economic war is accelerating. This is the result of at least fifty years of incompetence from US political "leadership". This isn't about democrats or republicans. They have all been ignored their duty to look after national interests. Instead, they continue to play dumb-as-can be political games for self and party as opposed to acting with people and nation as objectives. The most current example of this is the, again, dumb-as-can-be infrastructure spending proposal. I dare anyone to make a list of ten companies who have chosen to locate their operations somewhere other than the US due to issues with our roads and bridges. Just ten. That's not much to ask, is it? One would not spend this kind of money to "bring back" one company. No. You would want dozens. Well, name ten. Just ten. You can't. You can't because the entire premise is dumb-as-can-be false. NOBODY is going to relocate or make a massive investments in the US because we spend trillions of dollars on redoing perfectly good roads, bridges and government buildings. Nobody. This is unbelievably dumb at a time when we need to be incredibly smart. Here's a list of 397 cities in the US: https://en.wikipedia.org/wiki/List_of_United_States_cities_by_population https://en.wikipedia.org/wiki/List_of_United_States_cities_b... I dare anyone to find ten companies who chose not to operate in the US because they could not find good roads and bridges in any one of these cities. Frankly, I can't even think of a single company, much less ten. We are being told we need to spend unimaginable amounts of money on roads and bridges. Put simply, it's complete bullshit and it is the kind of decision someone makes to lose, not to win. What do we need to spend money on? My guess is that #1 has got to be education. The problem with this is that it is a long term investment. This decision should have been made twenty years ago. It takes that long for results to produce economic returns. The Chinese were sending their kids to US universities twenty years ago. They are all running companies in China right now. While this was going on our educators focused on race, class and ideological warfare. While China is trying to be as entrepreneurial as possible our educators focused on producing brain-dead socialists, a great example of which is representative Ocasio-Cortez, probably the best example of just how far off the mark US education has gone. As someone who actually lived in the kind of thing this moron is pushing I cannot believe she was not laughed off the stage within microseconds of coming to the scene, much less reach the level she has. If you are the product of the kind of brainwashing the US educational system has delivered over the last couple of decades you will disagree with this. Of course. However, that does not make the fantasies you believe true. Anyone who has lived and has been educated outside of this distortion field cannot believe the nonsense US some young adults actually believe. Things like supporting socialism and wearing a t-shirt with Che Guevara (a mass murderer) as a sign of who-knows-what, are baffling to anyone who was not subject to ideological elements in US education. This is the first time I have, in the decades I have lived in the US, heard a major leader on the left (in this case, Biden) finally speak the truth on communism and socialism: https://youtu.be/eL2ThTOaHXg?t=18 https://youtu.be/eL2ThTOaHXg?t=18 Will our educators now stop with the nonsense? Instead of burning cash on roads we need to put businesses on those roads. Industry. We need to dump billions into industries such as electronics and semiconductors. Heck, we need to dump billions into ever single industry, because they are ALL GONE. Try to buy US-made wire, screws or connectors for example. Some, sure, however, the overwhelming majority of everything that goes into consumer, commercial, industrial and military products is made in China. How is that a formula for success? At all? We are setting up to spend trillions rebuilding roads and bridges. This will not attract or compel even a single company to bring a non-trivial amount of jobs to the US. And, while we are busy spending money we don't have on absolute bullshit, Chine is going to continue to invest money as fast as they can on what really matters. They will invest on and subsidize any business or business segment that can deliver true long term competitive advantages for their nation and people. We will wake up, ten years later, with a bunch of nice new roads and bridges and twice the unemployment. On top of that, this year, so far, we have let over a MILLION people come through the southern border. https://www.reuters.com/world/americas/us-border-arrests-top-1-million-fiscal-year-2021-2021-06-25/ https://www.reuters.com/world/americas/us-border-arrests-top... At this run rate it is likely that this year alone that number will top a couple million. If we continue at this pace you are looking at five to eight million in four years. BY DEFINITION and as a matter of cold-hard facts, 100% of these people are unemployed. And, again, as a matter of cold-hard facts, we are NOT magically producing two million additional jobs per year to fully employ them. And so, we have a situation where China is bound to take even more jobs out of the US while we invest in the wrong things and actively import millions of unemployed. Despite what this might sound like, this isn't political at all. This is as common sense as things can get. If you give me the opportunity to damage a competitor by taking away business (China taking away jobs), driving them deeper into debt (waste money rebuilding roads and bridges) and increasing their baseline costs (importing millions of unemployed). Well, that's a dream. That's a competitive dream. If your competitors insist on self destructing you take every possible opportunity to push them over the cliff. That's what China is doing. Not because they are evil. No. It's because we are stupid and we are doing it to ourselves. Looking at it with detachment, from the perspective of a competitor, it's almost too easy. We have been consistently stupid for fifty years. What did people think would happen? You don't win a basketball game by giving your opponents free turnovers. You win by scoring more than they do and controlling the ball as much as possible. We have been giving it away for fifty years, and, just like in a baseball game, there comes a point beyond which reversing the score is simply impossible. If we don't demand more from our politicians the writing is on the wall, it has been there for all to see for quite some time.
• trasz 5y ago
  See, that’s the thing about China: it seems to value their citizens more than some company’s money.