Monetary blogger crackdown leaves China buyers scrabbling for information
China has taken crackdown on financial blogs and social media, a move that could compound the difficulty of getting reliable data on the world’s second largest economy.
The restrictions came as disagreement among the top echelons of Wall Street widened over whether investing in China was a wise bet.
A snowball-like overhaul of policy has surprised veteran Chinese investors, scared the markets and raised questions about which sector would be targeted by Beijing next.
Last month the Cyberspace Administration of China launched a “special rectification campaign”. The Internet regulator takes action against market skeptics and those who express pessimistic views about the Chinese economy – as well as misinformation and misconduct broadcast by financial news services and social media accounts.
China-focused economists, analysts, and academics recognized the problems caused by uninformed online commentary and rampant fraudulent activity. However, they warned that an excessive reach of the campaign would also silence valuable voices that deviated from Beijing’s official narratives.
A senior Chinese markets analyst who refused to be named said a lack of information about the country “absolutely” creates an environment in which misjudgment and misjudgment are more common.
“I think it’s a huge risk. . . It will only make people more nervous to say something, ”he said. “It worries me: will we really know what’s going on? Because there are already problems with the data. And now we will have less of this basic color. “
A Hong Kong-based Chinese bond investor said the moves would further limit understanding of which debt issuers are “trustworthy” because blogs and social media are sometimes the only places to get information about staff changes and government investigations or arrests.
The response to the watchdog’s investigation was quick. Local authorities have made a number of arrests in what they consider to be the most outrageous cases of stock manipulation, including cases where the alleged perpetrators used live broadcasts and WeChat groups to “pump and dispose of” stocks.
In Shanghai, the first volley fired by regulators resulted in securities and internet officials deleting more than 17,000 “malicious information” and closing more than 8,000 illegal online accounts. In Shenzhen, 14 suspects were arrested after authorities cracked a stock tampering case.
Only “10 people in the world”, including Xi Jinping, know which direction China is going, says an analyst © Ng Han Guan / AP
Social media platforms are cleaning up websites and blogs, with self-regulatory efforts taking place on major Chinese social networks like Tencent’s WeChat, the Twitter-like Weibo platform, and Douyin, ByteDance’s sister app to TikTok.
Huang Sheng, a prominent financial commentator in Guangdong with more than 5 million followers on his platforms, has been arrested and his WeChat and Weibo accounts appear to be inactive.
Xu Xiaofeng’s Weibo account, which has 4 million followers, has not been updated since the beginning of July. Posts from another financial blogger, Yi Wei, followed by hundreds of thousands of people appear to have been cleaned up.
There are also indications that Chinese police are tracking and questioning people who use foreign financial news sites through a new anti-fraud app, the Financial Times reported this week.
A China-based expert said the raid would likely extend to anyone who ‘misinterprets’ economic data, despite “there is a tremendous amount of fraudulent activity”.
“That means that they fundamentally disagree with Beijing’s interpretation of the data. . . Those of us who are trying to be a little bit more objective or a little bit more cynical, I think we are all concerned about the implications. It’s just too early to say that, ”he said, asking for anonymity.
The veteran China analyst added, “There has always been headline risk with China, but now there is a different level of headline risk. Any kind of comment or small article in a newspaper about a particular sector can move the market the next day in ways that simply wouldn’t have happened in the past. “
A Western economist focusing on China, who also refused to be named, noted that “a number” of data series had been discontinued, including statistics on social unrest. There were also frequent and inexplicable revisions of other datasets, while “microdata” for households and businesses, which are critical to economic research, was also not available.
The risks inherent in China’s bleak economic landscape coincide with a desperate search by investors for information about the direction of Beijing’s economic plans and regulations.
In the past few months, this has wiped the market values of e-commerce, ridesharing, gaming, education and entertainment groups by hundreds of billions of dollars, and sparked a deluge of philanthropy from entrepreneurs to appease Beijing.
The CCP also promised this week to consolidate the “leading status of Marxism in the ideological cyberspace sphere” as it issued guidelines for a “more civilized and better regulated” Internet, according to state media.
The veteran analyst believed that there may only be “10 people in the world” who know which direction China is headed with its comprehensive reforms.
“You are probably talking about [President] Xi Jinping, the Politburo Standing Committee and some key regulators, that’s it. “
Charlene Chu, a China expert with Autonomous Research, said foreign investors are struggling to understand what the changes will ultimately mean for the returns of an average Chinese company.
“There used to be a time when the average rate of return of a Chinese company was many times higher than other economies, and it obviously made perfect sense to be in China,” Chu said.
The uncertainty hovering over China now includes threats from stricter regulations, higher tax rates, more charitable donations and government interference in business decisions.
“All of this leads to the fundamental question of what happens to this excess return that you used to get as an investor in China, and how much it disappears or erodes in this new environment,” said Chu.
“It is possible that returns will not erode as much as people fear. We just don’t know at the moment. “
Reporting by Edward White in Seoul and Sherry Fei Ju in Beijing