Walter Hutchens’ Blog

The China Securities Regulatory Commission (CSRC) last week released new rules on the “material asset restructuring” of listed companies.

The China Securities Journal reports on the new rules (in Chinese) here.

The CSRC titled the rules 上市公司重大资产重组管理办法 Shang shi gongsi zhongda zichan chongzu guanli banfa (Measures on Material Asset Restructuring by Listed Companies) and 关于规范上市公司重大资产重组若干问题的规定 Guanyu guifan shang shi gongsi zhongda zichan chongzu ruogan wenti de guiding (Regulations on Assorted Issues Related to the Standardization of Material Asset Restructuring by Listed Companies). They also released related disclosure rules.

Earlier this month Beijing’s municipal government published a “guiding opinion” on promoting the development of the financial sector in the city (a Chinese press report about it is here, and one with more background here).

Beijing’s Xicheng District, where “Financial Street” (Jinrong Jie) is located—the area where, inter alia, the China Securities Regulatory Commission is based—earlier promulgated its own local policies on encouraging financial sector firms to locate in Xicheng (available here in Chinese).

It seems inevitable that Beijing, Shanghai and Shenzhen will compete to become China’s financial hub. But this doesn’t have to be a zero sum game, does it? Most US SEC employees are in DC, though they also have a good contingent in NYC where the NYSE, Nasdaq and the big investment banks are based. Meanwhile most options trading flows through the Chicago Mercantile Exchange. China’s financial sector may continue to shake out this way—with regulatory emphasis in Beijing but the exchanges and banks in Shanghai and Shenzhen. China is huge, so they could have more than one financial “center.”

But the China case is different because the exchanges are not really SROs and the financial sector is managed mainly through central-level policy making. Thus government planning, not organic growth through private ordering, seems to be the key venue for competition among cities to become mainland China’s “financial center.” Meanwhile, Hong Kong (and to a lesser extent New York) have some claim on the title “China’s financial center” in terms of raising capital through public offerings.

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Title of Beijing’s new “guiding opinion:” 《北京市人民政府关于促进首都金融产业发展的意见》Beijing shi renmin zhengfu guanyu cujin shoudu jirong chanye fazhan de yijian).

Front page of Saturday’s WSJ: “China Stocks, Once Frothy, Fall by Half In Six Months,” with James Areddy and Craig Karmi reporting (avail here, sub. req’d) .

In my international business classes I often play excerpts from Yum Brands’ quarterly conference calls with financial analysts. They illustrate nicely how something as prototypically American as the parent company of KFC and Pizza Hut is now obsessed with China. Here Reuters reports that the CFO of Papa John’s pizza is in Shanghai announcing plans to open 500 restaurants in China over the next five years.

The article further quotes him as saying greater than 20% of the company’s revenues will come from China this year. That must be wrong—they only have 100 stores in China now out of 3,000 overall. The CFO must have meant their China stores account for > 20% of overseas revenues or something like that, but in any case it shows how China’s, ah, rise offers opportunities as well as threats for US business.

This blog entry from a Chinese teacher offers some thoughtful ideas about how video games, which she calls a category of internet addiction (most gamers in China play online games, not console-based games), differ from conventional education.

Along with the customary points that video games offer immediate feedback and give many incentives for continued play through their structure of levels, opportunities to earn virtual money and ways to gain additional “powers,” she also points out that electronic games 1) allow unlimited attempts to pass a given level and 2) don’t stigmatize players for failure—”dying” doesn’t imprint on anyone’s mind (since the game has no mind) that a player is a weak performer, thereby prejudicing judgment of the player’s efforts on subsequent attempts.

Good points for teachers to remember.

The Times notes that Silicon Valley is also in a bit of a slump, with the lack of M&A or IPO exits causing VCs to be more parsimonious about funding new ventures.