China's regulation crackdown

From Tokyo, Japan and Sterling in the United Kingdom. This is Down to Business English with your hosts Skip Montreux and Des Morgan.

How are you today?

Not too shabby skip. How about yourself? Ah.

Actually, I'm feeling quite chipper.

What are you so chipper about?

Well, just before sitting down behind the microphone today, I took a quick glance at my cryptocurrency portfolio. And much to my surprise, it's doing very well.

Nice. I didn't know you'd invested in cryptocurrency.

just a tiny amount about six months ago. But to be perfectly honest, it has been quite a ride. Very, very volatile.

And I think it will remain so for quite some time. All

Why do you say that?

Well, I'm neither a cryptocurrency nor an investing expert. But the way I see it, cryptocurrency has two major hurdles. Okay.

And and what would they be?

First, it's the currency of choice for criminal activity.

Sure. that being the case with the ransomware activity that has been going on over the past 18 months, all of the ransoms had to be paid in Bitcoin.

Which makes it less likely for governments and financial institutions to accept cryptocurrency wholeheartedly.

And the second hurdle.

China. They have really put the brakes on it. They've put regulations in place that prevent banks from exchanging it with fiat currencies. Outlawing fund managers from investing in it and barring online payment services from using it as a payment method.

Okay, that is all very true.

When you have the second largest economy in the world not accepting cryptocurrencies, you have an issue.

Well, it is funny that you mention those regulations.

Uh why?

that? Because those regulations related to cryptocurrency were part of a slew of regulations that the Chinese government has come out with over the past year. And these regulations have had a significant impact on a wide variety of industries and sectors.

I have heard the odd headline relating to this.

Experts are saying that China is entering a new era of how business is done.

And that's our story for today.

That's right.

Sounds perfect.

Great. So let's do it. Let's get D2B down to business with China's regulation cracked up.

I have to say from the outset, Skip, that regardless of one's political ideology, there is no denying that China is a modern economic miracle.

There is no doubt about that, Des

don't want to date myself, but I actually remember when US President Nixon visited China.

Oh, the very first US president to do so.

Opening the door to better relations between communist China and the West.

I have faint memories of that as well.

That was almost fifty years ago in nineteen seventy two.

And over those five decades, China has risen to where they are today, the second largest economy in the world. Ahead of the European Union and behind the United States.

But in order to progress so far in such a relatively short amount of time, the Chinese government made use of a unique hybrid of communist and capitalist policies. And in doing so lifted billions of people out of poverty.

Not to mention creating some of the wealthiest companies and people in the world. Did you know that earlier this year, China surpassed the United States as the home of the most billionaires?

Did not know that. How many billionaires are there in China?

Over one thousand.

Incredible. But you say China is now entering a new era.

According to Alan Song, the founder of the Beijing based private equity firm Harvest Capital. The age of reckless capital and expansion is over, and a new era that prioritizes fairness over efficiency has begun.

That is quite the statement. What is he referring to exactly?

He is talking about all the government regulations that have been introduced starting last year.

What can you tell us about these regulations?

Well, it started really with the scheduling of the dual IPO of Jack Maw's ant group last November.

Oh, the founder of Alibaba?

The one and only. The ant group grew out of Alipay, which was originally set up as an escrow service between buyers and sellers on Alibaba.

In other words, Alibaba acted as the financial middleman between sellers and buyers.

That's right. A buyer would give Alibaba money, who would then hold it in escrow until the product was received from the seller. Once the transaction was complete, Alibaba would then release the funds to the seller.

Sounds like a nice, safe way of doing business.

Sure, but at the same time it did bend some of China's money lending laws. But for the most part, the government allowed it, or at least looked the other way. Because Alibaba was so instrumental in growing China's e commerce industry.

This would be an example of the hybrid approach I mentioned.

I suppose so. Over time, Ali Pay expanded using their two main resources.

And what were those two resources?

Access to capital and customer data. Eventually, they diversified into five major areas: online payment processing, money lending, wealth management. Customer credit ratings, and health insurance, and put all of that under the umbrella of the Ant Group.

That is quite the empire.

A very powerful empire that made the Chinese government very nervous.

So what happened?

A few days before the dual IPO in November.

W wait wa wait a minute, Skip. Just so that I'm clear on this, by Joule IPO you mean that uh the Ant group was making initial public offerings on two different stock exchanges?

That's right. They were about to list on both the Hong Kong and Singapore Stock Exchanges. And it was anticipated to be the world's largest IPO in history. How much

Which did they expect to raise?

Projections were for something in the neighborhood of thirty four point four billion dollars. which would make Ant Group the fourth largest financial company in the world, after Berkshire Hathaway, Visa, and MasterCard.

But the Chinese government put a stop to it.

Indirectly, yes. A few days before the IPO, the government introduced new regulations that restricted how much money could be lent across provincial borders and caps on loans to individuals.

In essence, they damaged Ant's business model to the point of making potential investors nervous.

And on top of all that, regulators hauled Jack Maw into the office, so to speak, and gave him a good talking to.

They arrested him? Well

Well it didn't go that far, but he did fall off the radar for several months. Even more interestingly, a few days after speaking with him, Ant's IPO was suddenly canceled.

I imagine that burned a lot of investors.

It did. And that was just the start. In April of this year, the government fined Alibaba$2.7 billion for monopolistic business practices. And ordered Ant Group to separate its payment business from its personal finance business.

Someone certainly has it out for Jack Ma.

It's not just Jack Moss. Didi, China's ride sharing company, IPO'd in early July on the New York Stock Exchange. Two days later, China's cybersecurity agency launched an investigation into how they collect and store user information. Then, only a few days after that, they ordered all App Store operators in China to pull Dee Dee's app from the internet and told Dee Dee that they could no longer register new users. Wow.

That's pretty unprecedented. What about other industries? You said that there were a wide range of sectors being affected by new regulations. Well

Well, you have already mentioned what happened with cryptocurrency, but in addition to that, there have been new regulations in real estate. in the food delivery sector and most recently the multi-billion dollar private education industry.

Education? Um why are they going after teachers?

Well, I wouldn't say they're going after teachers per se, but they are going after the companies making a profit off of teachers' backs.

Specifically what type of regulations have been placed on the education sector?

All private for profiting tutoring companies are now barred from raising capital. They must register as nonprofit organizations, and they cannot offer classes on weekends or on national holidays. or teach subjects that are taught in public schools.

That basically wipes out the industry.

That is exactly what it does. Investors have been ditching education stock as fast as they can. The top two firms listed on the Hong Kong and New York stock exchanges have lost roughly 70% of their value. In fact, according to Bloomberg, the combined losses of Chinese based tech and education stock has lost wait for it one trillion US dollars since February of this year.

Okay. Obviously there are major changes underway in China, but what's triggering all this?

There are many reasons. But two main factors, according to China Watchers, is a push for self reliance as the divide between the United States and China becomes wider. And Xi Jinping's consolidation of power before his leadership renewal next year.

What I'm saying is China wants to have more control of their economy by relying less on foreign investment driving big Chinese companies?

That is a very simplified synopsis, but in part, yes. But I also think Xi Jinping wants to reduce the financial burden on everyday Chinese citizens in what is referred to as the Three Mountains.

The three mountains?

The three biggest expenses in Chinese life housing, healthcare, and education. Almost all of these regulations are aimed at reducing costs in each of those areas.

And experts are saying that this is just the beginning of a wave of regulation.

That is what they are saying. But these things have a way of balancing themselves out, so we will just have to wait and see what happens.

Let's do that and maybe revisit this topic in the future.

In the meantime, Des, why don't you and I get D2D? Down to vocabulary.

Do you find Down to Business English useful in your English studies? Would you like to support the show? Consider becoming a D2B member today. Down to Business English memberships come with three great benefits. First, D2B members receive bonus content in the form of exclusive members only episodes.

2.

Within moments of a new episode being released, an audio script is automatically emailed to you. There is no need for D2B members to go through the time-consuming process of visiting the website. logging into their account, locating an episode, and then downloading the audio script file. And third, D2B members have 100% access to the entire library of audio scripts. All the way from season 1, episode 1, right up to the most recently released episodes.

Let's start off D2V with the noun crackdown. A crackdown is when someone starts to deal with poor or improper behaviour in a very strict manner.

We used crackdown in the title of today's episode China's Regulation Crackdown.

And our report was on the many ways the Chinese government is implementing strict regulations for doing business in the country. You can also use crackdown as a verb.

Oh, can you give us an example, Des?

Sure, it's common for a company to crack down on business trip expenses when sales forecasts are not being met.

Of course. If the sales team isn't making targets, they shouldn't be spending money on fancy hotels or business class air tickets.

Uh, you would think so, wouldn't you? What's our next word?

Next on our list is the noun to scuttle. Literally, to scuttle a ship means to cut a hole in the bottom of it, to deliberately sink it. Idiomatically To scuttle something means to intentionally destroy or damage it.

In the story, Skip reported that the Ant Group's IPO was scuttled last November. In other words, the IPO was deliberately destroyed.

The COVID pandemic almost scuttled the twenty twenty Summer Olympic. But fortunately, or unfortunately, depending on how you look at it, Japan was able to successfully hold the games this month.

That's right, they just finished didn't they? Congratulations to Japan for accomplishing that.

I just hope COVID case numbers don't keep skyrocketing over here. Anyway, what is the next word?

on, let's talk about the phrase to put a stop to something. Now, you might think this is a pretty easy verb, or you might be thinking it's synonymous with the verb stop, but there is a slight nuance difference. When you put a stop to something, you make something stop.

Which is different from stopping.

It is. When we put a stop to something, we are talking about an action being done by someone else, not an action that you're doing.

Right, so in the story, Des asked if the Chinese government put a stop to ant groups IPO. As the government were not the ones involved, or were not the ones doing the IPO, they didn't really stop it, but they did put a stop to it.

It's a very nuanced difference, but it is worth noting.

Can you give us another example?

In the past, a strong, confident handshake was an important tool for business. It really helped give a good first impression when meeting new clients. But with all the social distancing rules that have come into effect during the pandemic, COVID has definitely put a stop to handshaking.

Nice example.

What's our next D T V word?

Our next and final word for today is another expression to give someone a talking to. When you give someone a talking to, you speak to them strongly about something they have done wrong or something that they do that you feel is unacceptable.

In today's report, Skip reported that Chinese officials gave Jack Ma talking to. In other words, they had a serious conversation with him about why they didn't like what he was doing. Skip, has someone ever given you a talking to?

Not recently, but you know, early in my career, I certainly would get a good talking to from time to time about being late for work. But nowadays, in my current position, hmm, it's up to me to give younger staff a talking to once in a while.

to support Down to Business English. B2B Reach more people.

Skills. Be sure to subscribe to Down to Business English on Apple Podcasts or any place podcasts offer. While you are there, why don't you leave a rating and a review? On to Business English. Business News. To improve your business English.

Well, those are quite the developments going on in China. Thanks for approaching. that skip.

Yes, they certainly are. Another glaring example What interesting time do we live in? You know, I have been to Hong Kong once, but I have never been to mainland China. I really hope to get over there one day.

I think that is a must skip.

Maybe I will look into it more after travel restrictions start lifting around the world. For the time being, All travel plans have been scuttled.

Hopefully these vaccines will put a stop to this pandemic and we can get back to some kind of normality.

That would be very Des you were about to start your new teaching job soon, is that right?

That's correct. I will be away from the microphone for quite a bit while I get settled into that position, I think.

Well I wish you all the best with that and don't worry about D2B. Look forward to producing new episodes with some point down the road. As do I. Thanks for listening everyone. See you next time. Bye bye.

Have a comment or question about today's show? Don't be shy. Visit the D2B website or Facebook page and post any comments or questions that are going to be. Skip, Des or Samantha will be sure to leave a reply. Down to Business English. Business Music. To improve your business English.