Anbang's takeover not a surprise - Victor Shih

Victor Shih

The decision by China's insurance supervisor (CIRC) to take over Anbang, did not come as a surprise, says financial analyst Victor Shih to the Washington Post. The move will “inject a dose of confidence,” he added.

The Washington Post:

Though the political implications of his ouster are still unclear, analysts see the move as a way to shore up confidence in the company and signal tighter regulation to come. 

“The China Insurance Regulatory Commission’s stewardship is not totally surprising because Anbang Life still has millions of policies outstanding and may face liquidity problems if policyholders defected en masse,” said Victor Shih, an associate professor at the University of California at San Diego’s School of Global Policy and Strategy. The move will “inject a dose of confidence,” he added.

More at the Washington Post.

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The economic fallout of Xi's powerplay - Arthur Kroeber

Arthur Kroeber

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.”

More in the Financial Times.

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Xi Jinping: more control on private companies - Paul Gillis

Paul Gillis

China is bringing more of its private companies to heel, both domestically and their international investments. Peking University accounting professor Paul Gillis sees it as an effort by president Xi Jinping to consolidate its power, he tells the VOA.

The VOA:

China is probing the loan practices of a group of big private sector conglomerates who have been on a high-profile global spending spree over the past few years. And although the review targets only a few of the country’s most politically-connected companies, some analysts see an attempt to increase government control over the role played by the private sector in foreign markets. 

"I think this is an attempt to change the direction (of) the role these Chinese companies play in the Chinese economy," says Paul Gillis, a professor at Peking University's Guanghua School of Management. "To align them more closely with the policies of the government and to reduce the risks that actions of these private companies could end up having a shock effect on the economy as a whole."... 

Peking University's Gillis says it appears the Chinese government is coming to terms with how to effectively regulate private enterprises, companies that behave more aggressively than their state-owned counterparts. But he also sees the move as a further consolidation of power by President Xi Jinping, bringing companies more under the control of the central government. 

"I think many of the companies had a pretty favorable treatment from prior administrations, and I think Xi Jinping is less enamored of these large private companies than some of his predecessors were." 

Expensive acquisitions by companies like Wanda and Anbang have thrust China into the global spotlight. But the news and commentary that followed the companies' mega-deals has not always been positive.

More in the VOA.

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The fallout of the Anbang withdrawal - Shaun Rein

Shaun Rein

The move by Blackstone not to sell a landmark California hotel to the Anbang Insurance group for security concerns shows domestic volatility in the US and serious risk for Chinese companies looking for investment opportunities, says business analyst Shaun Rein to the South China Morning Post.

The South China Morning Post:

The remaining hotel is located on a peninsula that’s also home to the US naval base Coronado. The military facility comprises eight installations that lie on either side of the hotel, including an amphibious base, landing fields, and warfare training centre. 

It’s one of the main training grounds for the special-operations Navy SEALs, Bloomberg reported. 

“People are over reacting and there is great fear about Chinese companies expanding their investment in the US, particularly at a time when the presidential election is setting up China as the bogeyman...this is apparently has acted as a damper to Anbang’s purchase attempt,” said Shaun Rein, managing director of Shanghai-based China Market Research Group. 

“For Anbang itself, credibility remains a challenge as their retreat from the Starwood deal has triggered doubts into their real intention and ability, while the lack of transparency of the company’s ownership structure remains another major concern,” he added.

More in the South China Morning Post.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.
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Chinese consumers prefer German over American brands - James Roy

James Roy

Especially in the car industry, American brands are fighting heavily with their German competitors. And the Germans are doing better tells retail analyst James Roy to Bloomberg.

Bloomberg:

Mainland buyers have traditionally equated luxury with German nameplates. Volkswagen-owned Audi is China’s top luxury brand, with 30 percent of the high-end market in 2015; BMW is No. 2, with 25 percent; and Daimler’s Mercedes-Benz line is third, with 20 percent. 

Cadillac is far behind, tied with Chinese automaker Geely Automobile Holdings’ Volvo at No. 6—they each commanded 4 percent of the market last year, according to Bloomberg Intelligence. Lincoln had less than 1 percent. “There really is a solid association in Chinese consumers’ minds with the premium German brands,” says James Roy, associate principal of China Market Research Group. “American cars are viewed as fine and good and functional, but they don’t have that premium image.”... 

President Xi Jinping’s campaign against corruption and conspicuous consumption among officials may also provide an opening for U.S. cars. “Consumers are trading down,” says Roy of China Market Research Group. “People are not looking to be as obvious or flashy with their wealth as before.”

More in Bloomberg.

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Anbang can pay for its purchases - Shaun Rein

Shaun Rein

The Chinese insurer Anbang got quite some attention with efforts to purchase the Waldorf Astoria (US$1.9 billion), Blackstone (US$6.5 billion) and Starwood (US$14 billion). Worries that Anbang cannot meet its obligations are overblown, tells business analyst Shaun Rein to the BBC.

The BBC:

Shaun Rein, the managing director of China Market Research in Shanghai told the BBC that "it's clear they have political backing". 

"To grow that fast internationally and get the approvals requires strong connections."... 

(Since its foundation in 2004, Anbang has) in a short span of time, it has transformed itself through a series of foreign acquisitions, including Belgian insurer Fidea Assurances and Delta Lloyd Bank. 

Anbang has also expanded its presence domestically by buying stakes in China's biggest private lender Minsheng Bank, property developers, a wind turbine maker and even a traditional Chinese medicine company. 

However, there have been questions about how Anbang plans to finance its overseas purchases, given margins in China's insurance business aren't very large. 

Mr Rein suggests some of the concerns are overblown and that the firm has managed to attract billions of dollars in private financing. 

"You're seeing Chinese companies looking to become global players. They're well-capitalised and incredibly aggressive," he told the BBC. 

He compared them to Japanese firms in the 1980s, where many of its biggest names would buy overseas rivals and replace the management with their own. 

"The Chinese are very different. They're looking to buy brands, technology and management know-how," he said. 

Ultimately, it's clear that for Anbang, their biggest bet is on the safety and prestige of prime US property.

More at the BBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

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China has quite a lot of amazing companies, apart from Anbang. William Bao Bean discusses internet giant Tencent.

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