Chinese companies are running for cover as president Xi Jinping‘s powerplay is also hitting the economy. China regularly pulls the reins, when too much financial power is flowing outside the state economy, says renowned economist Arthur Kroeber, author of China’s Economy: What Everyone Needs to Know® in the Financial Times.
The Financial Times:
Mr Guo Guangchang, the Fosun chairman who presided over its purchases of Club Med, Cirque du Soleil and a struggling state-owned Portuguese insurer, said in an open letter late last month: “The recent scrutiny on overseas investments and financial irregularities is necessary, timely and can eradicate a lot of irrational investment.” He added: “If we do not take measures, foreigners will see us as ‘silly money.’”
Smaller players are running for cover. Some private companies have volunteered to take over some of China’s most disastrous state-owned firms in order to gain political protection.
“The party gets nervous when too much activity flows outside the SOE (state-owned enterprise) channels,” said Mr Arthur Kroeber, managing director at research firm Gavekal Dragonomics.
“Every so often, they need to rein things in, and the people who get hit are the politically incautious ones with a lot of leverage.”
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