After the Third Plenary Session of the 18th Central Committee of the Chinese Communist Party, Beijing followed in the footsteps of the United States and adopted a quantitative easing monetary policy.
The aim was to stimulate economic growth and boost the stock market.
However, the measures created a huge stock market bubble in the mainland, resulting in subsequent government intervention to curb speculation.
As the old saying goes, what goes up must come down.
Overpriced stocks and a market frenzy eventually led this summer to the worst stock market crash China has ever seen.
The Shanghai Composite Index and Shenzhen Stock Index plummeted almost 40 percent within three months, vaporizing US$30 trillion worth of investor wealth.
The effects of that historic tumble on the overall economy are still continuing to ripple.
In the meantime, observers also warn of a gloomy growth outlook for the Chinese economy as the manufacturing and export sectors as well as domestic demand all undergoing slowdowns.
Given the unpromising figures, any well-informed and experienced investor would probably sense that an all-out economic downturn or even recession in the mainland could be imminent and therefore it’s time to cash out and leave.
Li Ka-shing, the richest man in Hong Kong, who has created the biggest worldwide business empire any Chinese has ever built, is no exception.
It would certainly have been impossible for a world-class entrepreneur and investment guru like him not to have noticed the hidden risks in the Chinese economy, which explains why over the last couple of years Li has sold his assets in the mainland one after the other at a premium in tandem with a search for better investment opportunities abroad.
It is perfectly logical and understandable for him to do so.
In fact, anyone in his position would probably have done so too, because as the chairman of a public company that owns billions of US dollars’ worth of assets, he is duty bound to look after the best interests of his shareholders and make sure their money is being invested in the right place at the right time.
This is how the capitalist free market works.
Unfortunately, his business decisions, based purely on rationality and market sense, have brought him under fire from Beijing mouthpieces in recent months.
They have accused him, by selling his assets in the mainland, of being “ungrateful” for the support and favor the state has given him in the past.
In a recent article, titled “Don’t let Li Ka-shing run away”, published on the official website of the Outlook Institute, a think tank sponsored by Xinhua News Agency, the author slammed Li, who he said had profited so much from China in the past few decades, for abandoning his motherland at a time when its economy is facing difficult times, questioning his integrity and patriotism.
The article, which went viral on the internet, was removed from the website shortly after it had been published.
If anything, the article acknowledged an open secret: it would be basically impossible for anyone without the party’s blessing to run a successful business in the mainland.
It appears that Li’s withdrawal from the mainland market was regarded bitterly by some top officials as a betrayal of the party’s goodwill.
In my opinion, the fact that some officials in Beijing have continued to politicize Li Ka-shing’s asset disposals in the mainland and to liken his moves — which would have been viewed as normal business decisions in the West — to betrayal of his country suggests that there is still a long way to go before China learns to truly respect the free-market mechanism and play by the business rules commonly adopted by the international community.
Besides, the article ignored one basic fact: since the party’s blessing is the key to victory for any overseas businessman hoping to get a slice of the Chinese market, then it would probably be a fair statement to say that Li doesn’t owe the state anything, as many party officials have made big bucks on the back of his success.
Suffice to say there is no question of who is owing whom as far as Li is concerned, as his business ventures in the mainland created a win-win situation in which both his companies and the party officials who gave him the green light made a huge profit.
On the contrary, I think there is actually a lot the Chinese government and its state-run enterprises can learn from Li, as he has set a classic example as to how a company owned and run by Chinese can rise to stardom and become a key and respected player in the global market.
Beijing would only scare off foreign investors and deepen its economic woes if it continued to stick to its narrow-minded doctrine that private businesses are morally bound to help the state paper over the cracks in times of economic difficulty and should never sell their assets even when they are losing money.
That is simply against the most basic commercial principles.
In fact, Beijing should allow Li to run away even further, to demonstrate that it is determined to play by international business rules.
This article appeared in the Hong Kong Economic Journal on Sept. 25.
Translation by Alan Lee
[Chinese version 中文版]
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