Editor’s note for Monday, November 2, 2020

My thoughts today:

The imminent IPO of Ant Group, Alibaba’s fintech spinoff, in Shanghai and Hong Kong will probably be the world’s biggest — investors have already signed up for $37 billion of shares. Jack Ma (马云 Mǎ Yún), Alibaba founder and majority shareholder of Ant, told a financial forum in Shanghai last weekend that this was “the first time that such a big IPO was priced outside of New York City, which we wouldn’t have dared to think about five, or even three years ago.”

This is the latest news from China’s financial markets that have been partly responsible for making the fortunes of “257 billionaires over the past year, bringing the total to 878.”

Such stories are helping to shape a new hope and fear on both sides of the Pacific: that China will overtake the U.S. as a global financial center. Superstar investor Ray Dalio suggested this in a recent opinion piece in the Financial Times:

In the long run, timeless and universal truths determine why countries succeed or fail. In brief, empires rise when they are productive, financially sound, earn more than they spend, and increase assets faster than their liabilities. This tends to happen when their people are well educated, work hard and behave civilly. Objectively compare China with the U.S. on these measures, as I chronicle in an ongoing study, and the fundamentals clearly favour China.

But is Dalio underestimating the fragility of the Chinese system? You can bet he has never had to deal with anything like this in comfortable Manhattan:

At the same financial forum where Jack Ma talked up his IPO, he said that traditional Chinese banks operated with a “pawn shop mentality” and complained about China’s financial regulators. Ma’s rant may have been the trigger for an unceremonious invitation this morning to be dressed down by China’s financial regulators. Or perhaps it was just the gargantuan size of the upcoming IPO and the power that will bestow on Ma and his colleagues. But whatever the cause, the People’s Bank of China and three other government bodies today “conducted supervisory interviews” with Ma along with Ant Group’s CEO and its chairman.

This is perhaps why, despite the trade war, Trump’s hostile rhetoric, and many other negative factors: China-based companies have raised $9.1 billion by listing on U.S. markets this year, according to data compiled by Bloomberg, “putting 2020 on course for the highest annual total since 2014.” 

Our word of the day is to conduct supervisory interviews (进行了监管约谈 jìnxíng le jiānguǎn yuētán). The original announcement about the interview Ma couldn’t refuse is here — all 56 Chinese characters of it.

Our NEXTChina online conference is happening next week. Access Members can register for free for this year’s event by using the promo code NC20ACCESS. Click here to learn more and get tickets.

—Jeremy Goldkorn, Editor-in-Chief