Posts Tagged ‘Chinese government’

Beijing Pushes for a Direct Hand in China’s Big Tech Firms

October 12, 2017

Government regulators have discussed stakes in Tencent, Weibo and an Alibaba subsidiary

The Chinese government is pushing some of its biggest tech companies—including Tencent, Weibo and a unit of Alibaba—to offer the state a stake in them and a direct role in corporate decisions.

Wary of the increasing power of private businesses, internet regulators have discussed taking 1% stakes with social-media powers Tencent Holdings Ltd. and Weibo Corp. and with Youku Tudou, a YouTube-like video platform owned by e-commerce titan Alibaba Group Holding Ltd. , according to people close to the companies.

While the authoritarian government already exerts heavy sway over businesses through regulation, a management role would give Beijing a direct hand in innovative companies that service hundreds of millions of Chinese.

The biggest of these companies have expanded beyond their original niches into finance, health care and transportation, collecting data that give them unparalleled insights into people’s lives. Some companies privately say they are wary of the move.

The new steps come as pressure on China’s tech companies is rising. Regulators last month fined social-media platforms owned by Tencent, Weibo and Baidu for hosting pornography, fake news and other banned content. After the Communist Party newspaper People’s Daily attacked Tencent’s top game, “Honor of Kings,” for being too addictive for younger Chinese, the company’s share price fell 4% in one day, wiping $14 billion off its market value.

An initial rollout of what the government calls “special management shares” started with two internet media startups. Regulators and the People’s Daily website are taking stakes of less than 2% in mobile news platform Yidian Zixun and Beijing Tiexue Tech Co., operator of a patriotic news site.

In exchange, the investors get to appoint a government official to the companies’ boards and have a say over their operations, people familiar with the deals said.

Internet regulator Cyberspace Administration, a chief force in the government’s management share plans and a stakeholder in Yidian Zixun, referred queries to the Propaganda Department, the Communist Party’s press office, which didn’t respond to a request for comment. Nor did two other internet regulators.

Yidian Zixun and Beijing Tiexue declined to comment. Tencent, Weibo and Alibaba didn’t respond to requests for comment.

The Communist Party expropriated private businesses in the 1950s. Though the ban on private ownership was lifted in the 1980s, the relationship between businesses and Beijing remains fraught. Still, the party gave private enterprises some space to prosper as the leadership believed they needed economic growth to justify their legitimacy. Then Xi Jinping took power five years ago.

President Xi has fostered a more forceful role for the party in society, and the government has intervened in markets and businesses.

Beijing this summer clamped down on large private conglomerates pushing a wave of aggressive deal making overseas, leading to the detention of at least one Chinese tycoon and causing some companies to scrap deals and sell assets.

A document released by China’s leadership last month to encourage entrepreneurship instructs entrepreneurs to put patriotism first and follow the party’s guidance. At Mr. Xi’s urging, a campaign is under way to set up party units in private companies.

Alibaba’s annual cloud computing conference in Hangzhou, which highlights the company’s technical achievements, driven by cloud computing and big data, started Tuesday. The company’s founder is setting up a foundation to create opportunities for the poor.Photo: Getty Images

Tech has flourished in China over the past decades, in part, indu stry executives say, because the sector was new and seen as too risky by state companies and the government, which, in a way, shielded it from too much government regulation and crackdowns.

As their companies’ reach has grown, tech entrepreneurs have worked to retain room to maneuver while maintaining Beijing’s favor.

Alibaba founder Jack Ma, one of China’s richest men, is setting up a foundation with a goal of raising 100 billion yuan ($15.2 billion) from fellow entrepreneurs to create opportunities for the poor—a priority for President Xi.

“It’s like spending 100 million yuan to buy a talisman,” says a businessman who knows Mr. Ma.

Alibaba declined to comment on the foundation.

The usually press-shy co-founder of Tencent, Pony Ma, also took up a government cause this year, advocating for southern China’s greater economic integration with Hong Kong, the former British colony where a protest movement has challenged Beijing’s rule.

Alibaba, Tencent and search engine company Baidu Inc., along with others, agreed this summer to invest $11.7 billion in wireless carrier China Unicom, furthering a government goal of bringing private-sector money into state companies.

Related Reading

  • The Thin Line Between Innovation and Irritation (Sept. 21)
  • China Tech Workers Wanted: Women Need Not Apply (Aug. 17)
  • In China, Surveillance Feeds Become Reality TV (Aug. 10)
  • China Toys With an Internet Lockdown (July 25)
  • China’s Stopchat: Censors Can Now Erase Images Mid-Transmission (July 18)

Beijing began floating the idea of special management shares in the spring of 2016, circulating a draft proposal suggesting a 1% government stake in exchange for board representation. Some companies thought the plan would fizzle, in part because of the potential for shareholder lawsuits and the high cost of shares. A 1% stake in Hong Kong-listed Tencent, for example, would cost over $4 billion. Others privately worried that bringing the government onboard would jeopardize their relative independence and affect innovation.

“This is the thing that keeps Pony up at night,” says a Tencent executive about Mr. Ma, the company’s chief executive.

People.cn, the website of People’s Daily, is paying 7.2 million yuan for a 1.5% stake in Beijing Tiexue, operator of the nationalistic military portal and forum site Tiexue.net, according to regulatory filings. People.cn will appoint a board member to Tiexue.cn and will review all content on the site, a service for which Tiexue.cn will pay, according to the filings.

“Every company will have to do it eventually, so the earlier you get in, the more competitive advantage you’ll gain,” says a person familiar with the deal. The person says the arrangement should help Beijing Tiexue secure “all kinds of licenses.”

News app Yidian Zixun, which is owned by New York-listed Phoenix New Media and smartphone makers Xiaomi Corp. and Oppo Electronics Corp., agreed to government investment to secure licenses for video content, according to people familiar with the matter.

Beijing city’s internet regulator and an investment fund jointly started by the Finance Ministry and Cyberspace Administration paid 70 million yuan for a 1% stake, according to one of the people. A midlevel official from the Beijing internet regulator now works as a special board member out of Yidian Zixun’s Beijing office with veto rights over the platform’s editorial decisions, according to the person.

These deals will likely provide a template for future deals, says a person who sits on the boards of several media companies and was consulted by the government on the management share plan.

Small startups will get direct investment from state-owned firms, while larger deals will be done by government-backed funds. For the biggest companies, he says, it is possible that they will “donate” shares to the government or government funds.

Write to Li Yuan at li.yuan@wsj.com

https://www.wsj.com/articles/beijing-pushes-for-a-direct-hand-in-chinas-big-tech-firms-1507758314

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The Big Winner From China’s Foreign-Aid Frenzy: China

October 11, 2017

Beijing’s development assistance generally also lands deals for the country’s companies

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BEIJING—When Ghana sought to build a hydroelectric dam in the early 2000s, it failed to get World Bank backing. Then China stepped forward.

The Bui Dam was built through China’s brand of foreign aid: roughly half of the $600 million cost came as aid-like financing on favorable terms; the other half, commercial loans to be repaid with the proceeds from cocoa production.

China’s blurring of charity and business was examined in a new study from AidData, a research center based at the College of William and Mary in Virginia, which tallied 4,400 Chinese foreign-development projects from 2000 to 2014. AidData estimates one-fifth of the $362.1 billion took the form of Chinese government grants or other aid. Another one-fifth was too murky to determine whether it was aid or business. The remaining transactions were mostly commercial in nature.

China’s hybrid development model is playing a growing role, as Beijing begins its enormous “Belt and Road” infrastructure push across Asia, the Middle East and Africa. At $1 trillion, its projected cost is more than seven times that of America’s Marshall Plan for Europe’s post-World War II reconstruction, in today’s dollars.

Helping Hand? / China overseas development funding, 2000-2014. Source: AidData

Beijing’s ambition has funded pricey projects that might otherwise draw few backers, such as the Gwadar port in Pakistan and a data center in Djibouti, home to China’s first overseas naval base. But China has drawn criticism for financing authoritarian regimes and countries with unsustainable debt, such as Venezuela.

China has cast Belt and Road as a humanitarian effort, as well as a means to forge trade routes and strategic alliances. In May, China said it would spend 60 billion yuan ($9.1 billion) on assistance to Belt and Road countries in the next three years, including on emergency food aid and poverty alleviation.

The U.S. and other Organization for Economic Cooperation and Development countries define foreign aid, or “official development assistance,” as transactions that are at least 25% grant.

May 15: China is trying to build excitement around Xi Jinping’s ‘Belt and Road’ plan to expand trade with roads, railways and ports. Photo: Thomas Peter/Reuters

But for China, development assistance generally also lands business for its companies—a dual role that Beijing views as a win-win rather than a conflict, says Evan Ellis, a U.S. Army War College professor who studies China’s engagement in South America.

“The Chinese don’t just give loans,” he said. “They are almost all tied to using Chinese companies as subcontractors.”

China’s commerce ministry and the Export-Import Bank of China didn’t immediately reply to requests for comment. China has said its foreign assistance is based on mutual benefit and noninterference in the internal affairs of the recipient countries.

The U.S. and other member countries of the Organization for Economic Cooperation and Development, a Paris-based research body, agreed in 1978 to restrict the practice of requiring aid recipients to purchase goods and services, and to limit how aid can be mixed with commercial financing, said Brad Parks, AidData’s executive director. China isn’t a member of the OECD, so isn’t bound by the agreement.

Yu Zhengsheng, chairman of the National Committee of the Chinese People’s Political Consultative Conference—a political advisory body that includes some of China’s wealthiest businesspeople—and Ghanaian President John Dramani Mahama cutting a ribbon at the opening of a gas project in the Ghanaian capital of Accra in April of 2016.Photo: Ju Peng/Zuma Press

“This practice has raised serious alarm among countries that do not blend their development finance and trade finance,” said Mr. Parks.

The U.S. Export-Import Bank warned in its annual competitiveness report this summer that the agreement may suffer from China’s use of “mixed credits,” which combine regular export credits with aid or aid-like loans.

Image may contain: mountain, sky, ocean, outdoor, nature and water

Bui Dam under construction

The result is financing packages that countries adhering to the OECD agreement can’t match, the report said.

Deborah Brautigam, director of the China Africa Research Initiative at the Johns Hopkins University School of Advanced International Studies, said the U.S. had used foreign aid to boost exports for many years before unlinking the two areas.

China Reaches Out

  • Western Firms Bet Big on China’s Multibillion-Dollar Infrastructure Project (May 14, 2017)
  • Tightened Belt: China Skimps on Its Grand Trade Plan (May 9, 2017)
  • Beijing Spins a Web of Chinese Infrastructure (Jan. 16, 2017)
  • China’s ‘One Belt, One Road’ Takes to Space (Dec. 28, 2016)
  • China Builds First Overseas Military Outpost (Aug. 19, 2016)
  • Chinese-Pakistani Project Tries to Overcome Jihadists, Droughts and Doubts (April 10, 2016)
  • China Makes Multibillion-Dollar Down-Payment on Silk Road Plans (April 21, 2015)
  • China Readies $46 Billion for Pakistan Trade Route (April 16, 2015)

“We know these tricks,” said Ms. Brautigam. “These are all the same tricks that we had used.”

Defenders of China’s development model say countries gain valuable infrastructure that otherwise might not have been funded.

 Image may contain: 1 person, smiling

When Ghana sought to build its first dam in the 1960s, the U.S. and World Bank mobilized for the project, fearing in those Cold War days that the mineral-rich area would fall under Soviet sway. But by the early 2000s, public opinion in the West had turned against dam-building, making the World Bank reluctant to take on new projects like Ghana’s second dam, said Julian Kirchherr, an assistant professor in sustainable development at Utrecht University in the Netherlands.

China’s Sinohydro Corp. completed Ghana’s Bui Dam in 2013. In August, the Ghana Cocoa Board told the country’s parliament it was in financial distress due to obligations that including servicing the Bui Dam loan.

—Xiao Xiao and Yang Jie contributed to this article.

Write to Eva Dou at eva.dou@wsj.com

https://www.wsj.com/articles/when-it-comes-to-foreign-aid-chinas-taking-care-of-business-1507694463

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© AFP/File | Iranian President Hassan Rouhani shakes hands with Chinese President Xi Jinping (R) during a welcoming ceremony on January 23, 2016 in the capital Tehran

 (Enslavement Project?)

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China is the nation gaining the most, so China should step up to pay for a greater share of the planned railway network, the Thai transport minister said less than a month agao

China leads the way: Datuk Seri Liow Tiong Lai inspecting a model at the launch of China High Speed Rail Exhibition at the Kuala Lumpur Convention Centre in December last year. It is undeniable that China garners the most support in the bid for the HSR project, beating countries such as Japan.

China leads the way: Datuk Seri Liow Tiong Lai inspecting a model at the launch of China High Speed Rail Exhibition at the Kuala Lumpur Convention Centre in December last year. It is undeniable that China garners the most support in the bid for the HSR project, beating countries such as Japan.

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Pressure Mounts at the Top of Deutsche Bank

October 8, 2017

CEO John Cryan’s resistance to engage with HNA has irked Chairman Paul Achleitner, who helped woo the big shareholder

Most CEOs are zealous about meeting and courting their largest shareholder.

Not Deutsche Bank AG’s John Cryan. He’s made a point of avoiding his.

That owner happens to be Chinese conglomerate HNA Group Co., a controversial actor on the global scene, which in the spring built its stake in the German lender to nearly 10%.

Mr. Cryan has told associates he wanted nothing to do with the Chinese conglomerate. The iciness has raised eyebrows among Deutsche Bank supervisory-board members and clients, say people close to the bank. And it has irked Paul Achleitner, the company chairman who helped woo HNA. Mr. Achleitner doesn’t like executives airing negative views of individual shareholders, people close to the bank say.

The tensions between HNA, Mr. Cryan and Mr. Achleitner come as Deutsche Bank has struggled for most of a decade to revive profits and bring stability in its upper ranks. Undermining those rebuilding efforts are a slow turnaround and internal clashes over style and strategy that have spilled into meetings with clients and regulators, according to people close to the bank.

More on Deutsche Bank

  • Deutsche Bank’s Big Shareholder Heavily Financed Its New Stake (May 10)
  • Chinese Conglomerate HNA Becomes Deutsche Bank’s Biggest Shareholder (May 3)
  • Meet the CFO-Banker Who May Be Next to Run Deutsche Bank (March 22)
  • Deutsche Bank to Tap Market for $8.5 Billion (March 5)
  • Deutsche Bank’s CEO Struggles With Overhaul (March 31, 2016)

At the center is Deutsche Bank’s chief executive, Mr. Cryan, a Briton overseeing Germany’s largest lender. Mr. Cryan has had to mediate between German and U.K. managers vying for money and staffing in the bank’s reconfiguration for a post-Brexit world. He’s under pressure from investors to cut costs, update technology and resuscitate investment-bank profits. And in the background, he has shunned HNA.

Mr. Achleitner was the primary architect of Deutsche Bank’s existing executive suite and is known as a hands-on chairman. Some senior executives at times have bypassed Mr. Cryan to appeal to Mr. Achleitner for support on high-level decisions, people close to the bank say.

Early on, this muddied the management waters for Mr. Cryan, people close to the two men say. A bank spokesman says it is normal for a German chairman to have “regular interaction with all management board members.” Mr. Achleitner supports Mr. Cryan, and it is good for them to disagree at times, some of the people close to them say.

Over the past year, Deutsche Bank has survived legal battles that threatened its stability in the eyes of investors and clients, and raised $8.5 billion in capital. It also has flip-flopped on major strategy decisions, such as splitting and then recombining its trading unit and investment bank.

Deutsche Bank agreed to settle mortgage-backed securities claims with the U.S. Justice Department.
Deutsche Bank 

But this year brought other, fresh complications. Mr. Achleitner helped Deutsche Bank court HNA, before and during the German lender’s capital hike in March and April, people close to the bank say.

Mr. Cryan and HNA CEO Adam Tan haven’t met, the people close to the bank say. Mr. Achleitner and HNA representatives tried to bring the two together, but Mr. Cryan prefers to focus on clients and regulators, people close to the Deutsche Bank CEO say.

“Yes, he hasn’t met him, but of course he will,” a Deutsche Bank spokesman said.

HNA has drawn scrutiny well beyond Deutsche Bank. German and European regulators are reviewing the company, its funding and its Deutsche Bank holding, including what influence HNA might have over the bank as its largest shareholder. The closely held company had faced mounting questions about its ownership and potential ties to the Chinese government as it has ramped up overseas investment.

In the U.S. and elsewhere, some investment banks eager to profit from HNA’s deal fervor by funding and advising on mor e of its acquisitions have hit pause, people close to the firms say.

HNA uses derivatives to limit losses and gains on its Deutsche Bank holding. Mr. Cryan views the structure HNA used to invest in the lender as speculative, saying it creates risks for the lender and investors, people close to the bank say.

HNA said through a spokesman that it “continues to view Deutsche Bank as an attractive investment opportunity” and is “committed to supporting Deutsche Bank’s long-term success.” The company said it complies and cooperates with regulatory authorities and its relationship with banks remains strong. HNA has taken steps to restructure its ownership, including by setting up a New York foundation intended to be its biggest shareholder. The company spokesman said the foundation “looks forward to sharing more about its activities and ambitions in time.” A person familiar with HNA said the Chinese government doesn’t own a stake in HNA and none of its shareholders hold shares for any Chinese government officials.

HNA first disclosed in mid-February that it held a 3.04% stake in Deutsche Bank through Austrian asset manager C-Quadrat Investment AG . On March 5, Deutsche Bank announced plans to raise $8.5 billion through a share sale. HNA’s widely known interest in increasing its stake helped the capital hike go smoothly, by signaling support from a big new shareholder, bankers and investors say. This can encourage other potential new investors to follow suit.

On March 14, Mr. Tan had dinner in Frankfurt with Mr. Achleitner, Deutsche Bank’s then-Chief Financial Officer Marcus Schenck and a C-Quadrat executive, according to people familiar with the dinner. At the time, the HNA contingent expected Mr. Cryan to attend, some of the people say. He ended up not being in Frankfurt that night, according to people familiar with his schedule.

Two days later, Deutsche Bank announced that its supervisory board would nominate two new members, including one proposed by HNA: C-Quadrat’s CEO, Alexander Schütz. Mr. Schütz was advising HNA on other potential deals and had sold part of his firm to HNA.

In early May, HNA disclosed details of its nearly 10% Deutsche Bank holding in a regulatory filing. It showed that HNA used more than $2.8 billion in financing, mainly from UBS Group AG, to help purchase shares worth about $3.8 billion at the time. It also did a derivative deal with UBS. One portion of that deal protected HNA if the shares fell below €15. They have been below €15 since early August and closed Friday at €14.72.

Most Deutsche Bank executives learned about the structure from the filing, the people close to the bank say. HNA acquired most of its shares in the market, limiting Deutsche Bank’s control over the process, according to regulatory filings and the people close to the bank.

Mr. Cryan, a former UBS finance chief, told some people close to the bank that it couldn’t be certain how HNA is funded and that he didn’t like that the investor bought the bank’s shares and effectively bet against them.

On May 18, at Deutsche Bank’s annual meeting, shareholders overwhelmingly voted Mr. Schütz onto the supervisory board. While in Frankfurt, the board gathered for dinner. Afterward, chauffeured cars waited to take them to their homes and hotels.

Mr. Schütz was perplexed when no car appeared for him, and he caught a ride with a fellow board member, according to a story he and others recounted over the next few days. The ensuing banter was that someone at Deutsche Bank must have wanted the HNA guy to walk. Another version of events is that Mr. Schütz had declined a car, so Deutsche Bank planners hadn’t booked one.

Mr. Schütz tried again to arrange a dinner between Messrs. Cryan and Tan, suggesting they could meet in New York. Mr. Cryan didn’t respond to the invitations, people familiar with the matter said.

Write to Jenny Strasburg at jenny.strasburg@wsj.com

https://www.wsj.com/articles/pressure-mounts-at-the-top-of-deutsche-bank-1507460401

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The Telegraph reports that Deutsche Bank investors are losing patience over the time it is taking boss John Cryan to turnaround the lender, with one top shareholder warning he will feel the heat if things don’t move forward in the next six months.

John Cryan, who took on the chief executive job in 2015, has been under increasing pressure to restore profits in the German lender’s investment bank following years of legal investigations and fines for misconduct.

However, exasperation is growing after the bank, which slumped to a €1.4bn net loss in 2016 and in March embarked on an €8bn rights ­issue to bolster its finances, was downgraded by ratings agency Fitch last Thursday.

Investors urged Cryan to get a move on over the weekend, with one of the company’s largest shareholders warning that the management board will come under intense pressure if they don’t see results soon.

http://www.hitc.com/en-gb/2017/10/02/telegraph-pressure-mounts-on-top-firm-boss/

Hit the link below to access the complete Telegraph article:

Pressure mounts on Deutsche chief as investors lose patience

Robot revolution to boost jobs in London but not in the North

Chinese Fugitive Guo Wengui Amasses War Chest to Battle Beijing — “The U.S. is the last land of justice”

October 3, 2017
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Guo Wengui said he has set aside $150 million to advance his campaign against the Communist Party and fight Beijing’s attempts to discredit him

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Guo Wengui, an exiled Chinese businessman living in New York who has accused some of China’s leaders of corruption and other misdeeds, said he has prepared a war chest to advance his vocal campaign against the Communist Party and fight Beijing’s attempts to discredit him.

Mr. Guo, who last month applied for political asylum in the U.S., told The Wall Street Journal he has set aside over $150 million for legal fees and other expenses that he expects to incur over the next few years as he battles defamation and other lawsuits and steps up his antigovernment rhetoric.

“Nothing can stop me,” Mr. Guo said in an interview in his luxury apartment overlooking Manhattan’s Central Park recently. He said he is confident the U.S. will grant him asylum and will confront what he called Chinese government efforts to “silence” him.

“The U.S. is the last land of justice,” Mr. Guo said. “I would not be alive were it not for the U.S.”

Exiled Chinese businessman Guo Wengui spoke to The Wall Street Journal at the Sherry-Netherland hotel in Manhattan, where he lives. Photo: Natalie Keyssar for The Wall Street Journal

Mr. Guo—who also calls himself Miles Kwok —is a self-made Chinese property tycoon who has lived in the U.S. since 2015. He has said he fled China after learning that a state-security official he had ties to was going to be detained as part of a government anticorruption campaign.

Over the past nine months, Mr. Guo has captivated some politically minded Chinese citizens and vexed the Chinese government with a barrage of tweets, online videos and social-media posts alleging corrupt links between China’s political and corporate elites. He has pledged to release documents detailing Chinese politicians’ wealth and ownership of luxury real estate overseas—information he claims to have obtained through past work with Chinese state security and private investigators he hired to explore leads.

Mr. Guo has stepped up his attacks in recent weeks. He recently wrote an opinion piece in the Washington Times criticizing the “leviathan Chinese Mafia state” and made plans to give a speech Wednesday at the Hudson Institute, a Washington-based think tank. He said he will talk about China’s political ambitions and the impact of Chinese investments on U.S. national security. “China is at a very dangerous crossroads now,” Mr. Guo said.

Beijing has dismissed Mr. Guo’s allegations as falsehoods and seeks his arrest. Chinese courts have jailed and fined some of Mr. Guo’s former subordinates for crimes including fraud and embezzlement. Chinese media have published articles portraying him as unscrupulous.

Many of Mr. Guo’s allegations are hard to independently ver ify. Even his age—he told the Journal that he was likely born in 1967 or 1968—has been a matter of some debate, as he previously said he was born in 1970. Yet his allegations have the potential to intrude upon the ruling Communist Party’s plans for a carefully choreographed leadership transition this month.

At the twice-a-decade congress, Beijing’s ruling elite will name President Xi Jinping’s new leadership benchfor the next five years. Mr. Guo’s attacks on certain high-ranking officials could affect behind-the-scenes jostling among senior officials vying for promotions and key positions.

In August, Chinese officials told the Associated Press that Mr. Guo was being investigated in at least 19 major criminal cases that involve bribery, kidnapping, fraud, money laundering and rape. Several Chinese companies and individuals have recently sued Mr. Guo in U.S. courts. Among the pending cases against Mr. Guo is a defamation suit from acquisitive conglomerate HNA Group Co., which he has accused of having ties to a high-ranking Chinese official in the Communist Party. Another civil case was filed in New York by a Chinese woman who has accused Mr. Guo of raping her when she worked as his personal assistant.

Guo Wengui.  Photo: Natalie Keyssar for The Wall Street Journal

Mr. Guo denied the allegations, saying the they were part of a misinformation campaign being waged by Chinese officials.

“It has nothing to do with who I am and what I have done. They haven’t publicly disputed anything that I have disclosed so far,” Mr. Guo said, referring to the Chinese government. Sipping tea in a long black Chinese gown next to a fireplace in his apartment adorned with a Lego brick model of the London bridge, he challenged his detractors to produce evidence that he is wrong.

Mr. Guo’s supporters say Beijing is trying to frustrate his efforts to reach audiences in China. Several recent disruptions to the WhatsApp messaging service in China coincided with Mr. Guo’s live video broadcasts and interviews with U.S.-based Chinese media. The Cyberspace Administration of China has said “all companies are responsible for blocking illegal information, and so is WhatsApp.”

Over the weekend, a Facebook account used by Mr. Guo was taken down. A person familiar with the matter said Facebook disabled the account because it was used to share personal-identification information, in violation of terms of service barring unauthorized disclosure of such data.

Asked about the disabling, Mr. Guo said he believed it was the work of his opponents, and called the move “despicable” in a Twitter post.

—Alyssa Abkowitz in Beijing contributed to this article.

Write to Cezary Podkul at cezary.podkul@wsj.com and Chun Han Wong at chunhan.wong@wsj.com

 https://www.wsj.com/articles/chinese-fugitive-amasses-war-chest-to-battle-beijing-1507023004
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Facebook blocks Chinese tycoon Guo Wengui’s pages — His sensational corruption allegations shows why he’s a wanted man in Beijing

October 2, 2017

Social network takes down two pages associated with businessman who has made string of sensational corruption allegations against officials

South China Morning Post

PUBLISHED : Monday, 02 October, 2017, 1:14pm
UPDATED : Monday, 02 October, 2017, 1:27pm

Facebook has blocked two pages in the name of Guo Wengui, the fugitive Chinese tycoon who has been making corruption accusations against senior officials in recent months, according to a report by The New York Times.

The social media network said it had blocked a profile under Guo’s name and taken down another page associated with him, adding that both pages had included someone else’s personal identifiable information.

Facebook acted after receiving a complaint, said a spokeswoman.

“We want people to feel free to share and connect on Facebook, as well as to feel safe, so we don’t allow people to publish the personal information of others without their consent,” Charlene Chian, a spokeswoman for the social network, said.

Guo appeared to confirm the deletion of his Facebook pages on his Twitter feed with a link to The New York Times report. He blamed pressure from the Chinese government without elaborating further and did not respond to the newspaper’s requests for comment.

The incident took place at a sensitive time for China, as later this month it will host a five-yearly party congress meeting, which will see a major reshuffle in the top leadership of the Communist Party.

President Xi Jinping, who is sure to be confirmed in a second term as the general secretary of the party, is also expected to further consolidate his power by bringing his proteges into the top leadership, and writing his name in the party constitution.

 Guo Wengui has claimed asylum in the United States. Photo: Handout

Guo has made a number of corruption allegations against senior Chinese officials in recent months, including Wang Qishan, the party’s most senior anti-corruption official, who is considered an ally of Xi and the country’s second most powerful man.

But Guo has barely provided any hard evidence to back up his claims.

Beijing has previously filed an Interpol red notice requesting Guo’s arrest on bribery charges.

The Chinese authorities have also indicated they will file a second red notice concerning a rape alleged to have been committed outside China.

Last month a former employee of Guo’s also lodged a civil suit in the New York courts alleging he had raped her and seeking damages of US$140 million.

Guo has claimed political asylum in the United States, which does not have an extradition treaty with China.

http://www.scmp.com/news/china/policies-politics/article/2113651/facebook-blocks-fugitive-chinese-tycoon-guo-wenguis

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Facebook Blocks Chinese Billionaire Who Tells Tales of Corruption

HONG KONG — A Chinese billionaire living in virtual exile in New York, Guo Wengui has riled China’s leaders with his sometimes outlandish tales of deep corruption among family members of top Communist Party officials.

On Saturday, his tales proved too much for one of his favorite platforms for broadcasting those accusations: Facebook.

The social media network said it had blocked a profile under Mr. Guo’s name and taken down another page associated with him. Facebook said the content on both pages had included someone else’s personal identifiable information, which violates its terms of service.

Facebook investigated the accounts after receiving a complaint, according to a spokeswoman.

“We want people to feel free to share and connect on Facebook, as well as to feel safe, so we don’t allow people to publish the personal information of others without their consent,” the spokeswoman, Charlene Chian, said. She declined to say who had complained.

Mr. Guo did not immediately respond to a request for comment. The profile under Mr. Guo’s name was not verified.

Read the rest:

Duterte: Triad supplying illegal drugs to PH is based in Taiwan, not China

September 26, 2017
By:  – Reporter / @NCorralesINQ
 / 10:00 PM September 26, 2017
Rodrigo Duterte - 56th anniversary of Philconsa - Manila Hotel - 26 September 2017

President Rodrigo Duterte speaks at the 56th anniversary celebration of Philconsa at the Manila Hotel on Tuesday, Sept. 26, 2017. (Photo from an RTVM video)

The Bamboo Triad, which is based in Taiwan, not China, is the organized-crime group that has been supplying illegal drugs to the Philippines, according to President Rodrigo Duterte.

Duterte made the revelation in a speech he made on Tuesday at the 120th anniversary celebration of the Department of Justice at the Philippine International Convention Center (PICC).

“Itong drugs ngayon, it’s been operated by the 14K, Bamboo Triad,” he said. “They have taken over. They are cooking the shabu in the high seas. Tapos itatapon. Nakita mo sa Region 1, mga bins na empty na may Chinese character. It’s actually from Taiwan at lahat na.”

“I cannot blame the Chinese government or the people,” he added.

Duterte continued his revelation in another speech he made later, this time at the Manila Hotel at the 56th anniversary celebration of the Philippine Constitution Association (Philconsa).

“The Philippines today is a client state of the Bamboo Triad,” he said. “They have taken over the operations… Sad to say, the Chinese. But I do not mean the country and people in a sense that most of them are really into this kind of business.”

“I said they have decided to go international,” he added.“Philippines is a transshipment of shabu to America and it behooves upon America to work closely with the Republic of the Philippines, especially on this serious matter.”

The President said the Philippines was in trouble because it had been “flooded with drugs.”

/atm

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China’s Overseas Deals Going on Life Support?

September 25, 2017

Bloomberg

By 

Image result for life support, photos

As one Chinese company advances abroad, another retreats — or at least halts.

Shandong Weigao Group Medical Polymer Co. agreed to acquire closely held Argon Medical Devices Inc., a U.S. maker of biopsy forceps, for $850 million. At the same time, developer Country Garden Holdings Co. has paused its international expansion in response to government restrictions.

The push-pull dynamic proves one point: Overseas acquisitions remain far from off-limits for Chinese companies, as long as they’re in the areas that Beijing wants.

Argon is the latest in a string of healthcare deals by mainland purchasers. The company’s surgical devices are popular in the U.S., the world’s largest pharmaceuticals market — exactly the type of assets Beijing would like to see in Chinese hands. Shandong Weigao, in a tie-up with an unidentified private equity firm, will fund almost half of the purchase — $420 million — with debt.

Earlier this year, Aier Eye Hospital Group Co. agreed to buy Clinica Baviera SA, a Spanish eye-clinic operator. Shanghai-based Fosun International Ltd., meanwhile, is currently bidding for U.S. specialty drugmaker Arbor Pharmaceuticals LLC — despite the conglomerate having been singled out by the government for its debt-fueled offshore takeover spree.

Fosun is also moving ahead with a slimmed-down bid for Indian drugmaker Gland Pharma Ltd., after an earlier stake purchase was blocked by New Delhi.

Image may contain: 1 person, text

Over at Country Garden, it’s a different story.

Plans to expand in six Indian cities have been put on pause, Chief Strategy Officer Jeff Lin told Bloomberg News. The company, based in the southern city of Foshan, has already been forced to slow its international push as China’s capital controls hurt mainland demand for a $100 billion city the company is helping to build on four artificial islands in southern Malaysia’s Johor Bahru.

Real estate has been named as a target of China’s crackdown on “irrational” offshore investments, along with assets such as sports clubs and cinemas. Overseas direct property investment from the nation could drop 84 percent to $1.7 billion this year, Morgan Stanley has predicted.

That’s not to say overseas real estate is completely out of bounds. Tie in a One Belt, One Road angle and a developer can probably find ways of expanding into countries that China has identified to help create its modern-day silk route, which will connect central Asia, Europe and Africa. (India, having recently ended a border spat with China and snubbed its neighbor’s international trade initiative, may be an exception.)

But buyers are likely to have a much easier time shopping for medical and technology investments. Access to debt will present fewer obstacles, and failed deals need not slow momentum. China-backed private equity firm Canyon Bridge Capital Partners, fresh from President Donald Trump’s rejection of its takeover of Lattice Semiconductor Corp, inked a deal for Imagination Technologies Group Plc, a British designer of graphics chips, last week.

High valuations also mean such assets are easy to sell and may carry more profit potential. Fosun, for instance, has more than doubled its investment on Israeli medical devices maker Sisram Medical Ltd., which went public in Hong Kong last week.

China’s serial acquirers aren’t dead. They’re just adapting their focus to Beijing’s desires.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net

https://www.bloomberg.com/gadfly/articles/2017-09-25/chinese-buying-overseas-stick-to-medical-devices

China Widens Bitcoin Crackdown Beyond Commercial Trading — The most draconian measures any government has taken to control bitcoin

September 18, 2017

The plan represents some of the most draconian measures any government has taken to control bitcoin

No automatic alt text available.

BEIJING—Chinese authorities are moving toward a broad clampdown on bitcoin trading, testing the resilience of the virtual currency as well as the idea its decentralized nature protects it from government interference.

Regulators have decided on a comprehensive ban on channels for the buying or selling of the virtual currency in China that goes beyond plans to shut commercial bitcoin exchanges, according to people familiar with the…

https://www.wsj.com/articles/china-widens-bitcoin-crackdown-beyond-commercial-trading-1505733976

The People's Bank of China in Beijing. The PBOC maintains close control of the currency’s value onshore and allows the yuan to swing just 2% around the level it sets each day.
The People’s Bank of China in Beijing. The PBOC maintains close control of the currency’s value onshore and allows the yuan to swing just 2% around the level it sets each day. PHOTO: ZHANG HAIYAN/IMAGINECHINA

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“Most Draconian Measures Ever”: China Expands Bitcoin Crackdown Beyond Exchange Trading

Tyler Durden's picture

Last week bitcoin plunged over 40% from all time highs hit as recently as three weeks ago on news that China had ordered local exchanges to halt trading in the cryptocurrency. Since then, defying naysayers yet again, bitcoin staged a remarkable comeback, rising from under $3000 to $4000 in the last few days of trading, but China appears to be nowhere near done, and as the WSJ reports this morningBeijing is moving toward a “broad clampdown on bitcoin trading, testing the resilience of the virtual currency as well as the idea its decentralized nature protects it from government interference” in what the paper dubs the “most draconian measures any government has taken to control bitcoin.

According to the WSJ, regulators have decided on a “comprehensive ban on channels for the buying or selling of the virtual currency in China” that goes beyond plans to shut commercial bitcoin exchanges. The still unofficial policy was communicated to several industry executives at a closed-door meeting in Beijing on Friday, “according to people who were at the meeting.”

The move is notable because until last week, many China bitcoin entrepreneurs thought authorities might shut down only commercial trading activity while tolerating peer-to-peer, or over-the-counter, bitcoin platforms, which enable buyers and sellers to find each other and trade directly. However, it now appears that this was only the beginning as two years after we first warned that bitcoin will be used largely to circumvent Chinese capital controls (and said it would soar as a result when its price was just $230), the government has decided to put a complete end to the use cryptocurrencies as a means of offshoring “hot money.” Word of a more serious tightening spread after the meeting and at least one Chinese platform last week announced it would halt one-on-one trading services per official instructions.

Incidentally, this is what we predicted back in September 2015 when bitcoin was trading about 20x lower:

… if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits,  bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubbleone which could make the previous all time highs in the digital currency, seems like a low print.

In retrospect, we were right and it took China years to figure this out, and now – in a long belated reaction – the WSJ describes the Chinese plan as “some of the most draconian measures any government has taken to control bitcoin.”

Something strange is going on in the financial system. And according to The Wall Street Journal, it’s causing some investors to move massive amounts of money out of the banking system.

Some more details:

The crackdown on the bitcoin ecosystem represents Beijing’s possibly biggest effort so far to limit expansion of a system to rival the yuan. In a previous crackdown, in 2009, the central bank banned the use of tokens valued at billions of dollars created in China’s massive online-gaming networks for real-world purchases. A quasiregulatory body called the National Internet Finance Association of China (NIFA) warned investors about virtual currency trading in a statement last week and said that bitcoin platforms lack “legal basis” to operate in the country.

Confirming that Beijing is focused on bitcoin as a source of capital ouflow, WSJ quotes Li Lihui, a NIFA official, who told a technology conference in Shanghai on Friday that the goal of China’s monetary regulation is to ensure that “the source and destination of every piece of money can be tracked.”

So what is next in line for bitcoin in China?

A broader clampdown will likely include blocking mainland access to websites of foreign bitcoin exchanges such as Coinbase in the U.S. and Bitfinex in Hong Kong, say people familiar with the matter.

A lack of clarity from regulators has fueled worries about how far the government will go. One uncertainty, for example, is whether the ban will affect bitcoin deals made over social-messaging apps such as WeChat . People in the industry say a wave of bitcoin users in recent days migrated from WeChat to the encrypted messaging service Telegram.

Industry advocates hail bitcoin for allowing users to transact with each other without the involvement of a central authority. In reality, users access the market for virtual currencies via services and businesses that are centralized in real locations and therefore are susceptible to third parties. Any attempt by China to interfere broadly in the bitcoin network would test that notion further.

Blocking overseas exchange sites would add them to a long list of websites Beijing considers too sensitive, including Google and Facebook.

Of course, Chna’s crackdown is a double edged sword: after all bitcoin was created precisely with the contingency of a government crackdown in mind, and as such should bitcoin prove resilient to Beijing’s actions it will only make it that much more valuable, sending its price even higher. Furthermore, China would be effectively shutting itself out of a growing global market and potentially, lagging in blockchain development.

As we pointed out last week, as recently as last year, China accounted for the bulk of global bitcoin trading activity, but its share has dropped dramatically since the government started attempting to cool the market. China now accounts for less than 15% of bitcoin trading volume.


For now, Chinese authorities haven’t made public their stance on virtual currency trading, however it is coming.

A document passed around at Friday’s meeting and reviewed by The Wall Street Journal instructs Beijing-based exchanges to unwind their operations and provide information on bank accounts used for clients’ deposits by Wednesday.

Then there is the question of mining: “while China’s sway in bitcoin trading volumes has faded, the country remains a major creator of new bitcoin through a process called mining. Chinese bitcoin miners operate a vast collection of computers for the purpose in remote areas like northwestern Xinjiang, where they can access electricity for cheap.”

Until now, Chinese miners considered themselves immune from Beijing’s evolving stance on bitcoin trading. One entrepreneur said miners are now worried about authorities moving to limit their operations. “Using VPNs as a workaround will be difficult,” he said, referring to virtual private networks that allow users to circumvent China’s so-called Great Firewall.

Chinese miners loom large in the global bitcoin mining network, also serving an important role in the upkeep of the bitcoin ledger. Potential interference in how they connect to and use the internet could disrupt, at least temporarily, both the creation of new bitcoin and the speed at which global bitcoin transactions are confirmed, say people in the industry.

There is a slight possibility the draconian measures are just a political gimmick ahead of next month’s critical communist party Congress. The stepped-up tightening by regulators comes as China’s top leaders have been vocal about battling money laundering, in advance of an important leadership transition this fall. Last week, China’s State Council released guidelines aimed at better coordination between regulators to address the transfer of capital for illicit purposes.

Then again, maybe China just wants to take the BIS’ advice and launch its own official, PBOC-backed digital currency which it can track, tax and “adjust” as it sees fit, a step which India is currently contemplating.

Meanwhile, keep an eye on the price of bitcoin. If the news of today’s expanded Chinese crackdown fails to send the price of cryptos lower, the market may have “priced in” China’s aggressive intervention. In which case, the next move may be higher, and substantially so.

http://www.zerohedge.com/news/2017-09-18/most-draconian-measures-ever-china-expands-bitcoin-crackdown-beyond-exchange-trading

The Lattice Warning to China — China’s plan to dominate the global semiconductor industry

September 16, 2017
  
The U.S. blocks the purchase of a firm with sensitive technology.

By The Editorial Board
The Wall Street Journal
Updated Sept. 15, 2017 6:08 p.m. ET

The U.S. on Wednesday blocked the Chinese government’s attempt to buy Lattice Semiconductor Corp. , a manufacturer of advanced computer chips with military applications. Beijing’s American proxy, Canyon Bridge Capital Partners, refused to withdraw its bid even after the Committee on Foreign Investment in the United States, or Cfius, ruled against the deal.

Beijing wants to use the case as an example of Trump Administration protectionism, but that would be a mistake. The decision on Lattice is warranted, and evidence suggests tighter restrictions are needed on the sale of technology to China.

First the big picture. In January the Obama Administration issued a useful report on China’s plan to dominate the global semiconductor industry. The effort relies in part on forcing foreign chip makers to move operations to China or transfer technology to joint-venture partners in return for access to the Chinese market.

Last month the Trump Administration opened an investigation of this abuse of international trade law under Section 301 of the Trade Act of 1974, which allows the U.S. to retaliate unilaterally. The World Trade Organization would be a better venue for this dispute, but there is no doubt that Beijing is extorting U.S. intellectual property. China also obtains trade secrets through computer hacking and old-school spying. An FBI survey in 2015 found that China was responsible for 95% of economic-espionage cases, with its caseload growing 56% in a year.

Cfius oversees a third avenue by which Beijing seeks semiconductor technology: buying U.S. firms. Though it is only empowered to restrict deals on national-security grounds, the number of cases is increasing. In December the Obama Administration blocked a Chinese fund’s purchase of Aixtron SE , a German semiconductor-equipment supplier with assets in the U.S. State-owned Tsinghua Unigroup’s bid for U.S. memory-chip maker Micron Technology Inc. foundered in 2015 on doubts over Cfius clearance.

Lattice’s technology has been in Beijing’s cross-hairs for years. In 2004 the company paid a $560,000 civil fine for illegal exports to China, and in 2012 the FBI caught two Chinese nationals trying to smuggle Lattice chips. Tsinghua Unigroup bought a minority stake in Lattice last year before the Canyon Bridge bid. The American private-equity firm did not initially disclose that the investors in its fund were Chinese government entities.

Beijing wants Lattice’s field programmable gate array technology that goes into chips used in missile guidance and radar systems. The U.S. military has bought chips from the firm, and 22 Members of Congress warned Cfius in December that a Lattice sale could give China critical military technology.

This week’s rejection of the Lattice deal shows Cfius working as intended. But the scale of China’s efforts to acquire sensitive technology, as well as its military ambitions, suggests more scrutiny is needed. A recent Pentagon report warned that Chinese companies have invested in sensitive technology in the U.S. in ways designed to dodge Cfius oversight. For instance, Chinese firms have invested in startups that have conducted research with Pentagon grants.

Rep. Robert Pittenger (R., N.C.) and Senate Majority Whip John Cornyn (R., Texas) are drafting legislation to overhaul Cfius, and Treasury Secretary Steven Mnuchin has backed their idea to require added scrutiny of deals involving sensitive countries including China. Joint ventures and technology licensing could also be added to the Cfius purview.

The risk is that Cfius, which is secretive by necessity, will be abused for protectionist ends. The classic case is Senate Minority Leader Chuck Schumer’s partisan demagoguery in 2006 over Dubai Ports World buying some U.S. ports. The U.S. benefits from Chinese investment in nonsensitive areas, and Cfius revisions should not define national security too broadly.

But the scope and stealth of China’s industrial policy and IP theft require special attention. Beijing should consider the Lattice rejection a warning that predatory behavior will have political consequences.

https://www.wsj.com/articles/the-lattice-warning-to-china-1505431750

Related:

China Is Striving to Contain Its Once-Diving, Now-Thriving Yuan

September 11, 2017

The currency’s recent surge has prompted Beijing to shift course after two-year effort to keep it from weakening too quickly

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BEIJING—China is reversing a range of measures it had put in place to support its currency, a response to a recent surge in the value of the yuan that has hurt Chinese exporters and added to the country’s economic headwinds.

Starting Monday, the People’s Bank of China will scrap a two-year-old rule that made it more expensive for traders to bet the yuan will fall in value, according to a central bank notice sent to commercial banks late Friday.

The move, which ends a deposit requirement on trades called currency forwards, will make it less expensive for companies and investors to buy dollars while selling the yuan. That would put some pressure on the currency to decline, traders and analysts said. The step will “fend off macro-financial risks,” said the central bank notice, which was reviewed by The Wall Street Journal.

According to a separate notice by the PBOC, the monetary authority late Friday also removed the reserve requirement on foreign banks’ yuan deposits, which will release more yuan funds into what is known as the offshore yuan market in Hong Kong, potentially making it easier for foreign investors to bet against the yuan. That requirement was enacted in January 2016.

Related

  • Chinese Exports Grow Again (Sept. 8, 2017)
  • Yuan’s Surprise Strength Handcuffs China’s Ability to Manage Economic Decline (Sept. 8, 2017)
  • China Curbs Hollywood Deals, but Greenlights Tech Investments (Aug. 18, 2017)
  • China Maintains 6.9% Economic Growth (July 17, 2017)
  • China Issuing ‘Strict Controls’ on Overseas Investment (Nov. 26, 2016)
  • China to Raise Reserve Ratio for Offshore Yuan Clearing Banks (Jan. 17, 2016)
  • China Sets New Rules on Yuan Forward Trading (Sept. 1, 2015)

Officials familiar with the policy changes said authorities are also expected to phase out by the end of the month measures put in place late last year to curb China’s outbound investment, a move made when the currency’s value was falling sharply. Many companies complained that move resulted in a near-blanket ban on their foreign-investment endeavors. It will be replaced by formal guidelines issued by the State Council in August.

Those new guidelines encourage foreign deals in some areas such as technology, while discouraging them in property, sports, entertainment and other sectors. “As situations in the foreign-exchange market improve, it makes sense to withdraw some of those temporary measures,” said one of the officials involved in policy making.

In dismantling certain controls, Beijing is shifting course from an effort started two years ago to keep the yuan from weakening too quickly and to maintain confidence in the world’s second-largest economy. To do so, Beijing subjected outbound investments to heavy scrutiny, made betting on the yuan’s decline more expensive for traders and burned through $1 trillion in foreign-exchange reserves to support the yuan in the past several years.

China’s strategies gained traction this year. But an unexpectedly prolonged softening of the dollar has caused the yuan to soar, making the currency again a policy headache for the government. So far this year, the yuan has more than recouped all of its 6.6% decline against the dollar last year, and last week alone, it gained more than 1.8%—its biggest weekly advance in almost 12 years.

Andy Rothman, investment strategist at Matthews Asia, said the significant weakness of the dollar, along with Beijing’s continued intervention in the market that has led to a rebuild of China’s foreign-exchange reserves, has “left the Chinese government much less nervous about the need to micromanage currency flows.”

China’s foreign-exchange reserves rose by $10.8 billion to $3.09 trillion by the end of August. Since the end of last year, China’s reserves have risen $81 billion.

Mr. Rothman said he didn’t think there has been a change in Beijing’s overall approach to the currency, which is to keep the yuan relatively stable against a basket of currencies while letting the direction of the dollar drive the yuan’s movement. “If you think the dollar will continue to weaken, it makes sense to loosen some of the capital controls” that aimed to support the yuan, he added.

The yuan’s surge is starting to drag on China’s export growth, making Chinese goods more expensive and threatening to erode profits for many manufacturers that sell to foreign markets. That further weighs on the economy which is forecast to resume a yearslong slowdown and is struggling with anemic private investment, heavy corporate debt and frothy real-estate prices.

“It’s really hard to understand why the renminbi is soaring all of sudden,” said Pan Haisong, who runs Shanghai Taijing International Freight Co., an international shipping company. Renminbi, or the people’s currency, is another name for the yuan.

Mr. Pan said many of his exporter clients have reduced their orders because of the the rising yuan.

Customs data released Friday show that China’s exports increased 5.5% in August from a year earlier, lower than July’s 7.2% rise and the 6% growth forecast from economists polled by the Journal. While Chinese manufacturers are expected to continue to benefit from a recovery in global demand, economists said any continued appreciation of the yuan would crimp a further expansion of Chinese exports.

Beijing isn’t looking for a wholesale weakening of the yuan and still retains formidable control of the currency—from limits on the ability of Chinese companies and individuals to take money out to a heavy hand in setting the yuan’s official rate against the dollar. Known as the “fixing,” the daily official rate indicates which way Beijing wants the yuan to go.

People’s Liberation Army guards in front of the People’s Bank of China building in Beijing in JanuaryPhoto: Gilles Sabrié for The Wall Street Journal

On Friday, for instance, the central bank set the fixing weaker than the market had expected, hinting at a desire to control the yuan’s pace of appreciation.

“This is a small step in stemming what has been a strong movement of renminbi strengthening, but there are still many capital controls in place,” said Brendan Ahern, chief investment officer of KraneShares, which runs several China-focused exchange-traded funds.

“These new measures may decelerate the recent surge of the renminbi,” he added.

The PBOC deposit notice issued late Friday involves a rule enacted in October 2015 that required banks to set aside reserves with the central bank when dealing in a financial contract known as currency forwards. Under the rule, banks that were buying dollars while selling yuan under a forward contract were required to deposit $20 with the central bank for every $100 traded. The reserve effectively raised the cost of wagering against the yuan.

As of Monday, no deposit will be required for such a transaction, in effect removing a penalty on a tool that many traders and investors used two years ago to bet on the yuan’s decline. “Now the PBOC is basically inviting short sellers in to help stem the yuan’s rise,” said a currency trader in a Shanghai-based bank.

The latest policy twist underscores how hard it is for Beijing to control the currency to its exact liking. Deepening economic ties between the country and the rest of the world have led to greater cross-border flows of funds, inevitably subjecting the yuan to the whip of market forces, despite the government’s penchant for keeping a strong hold on the economy. At the same time, companies and investors look at Beijing’s policy directions for clues as to which way to play the yuan—and then sometimes pour in, driving the currency in one direction.

Even before Friday’s move, the yuan’s recent surge and its impact on the economy had begun to turn some investors cautious. “We’re neutral on the yuan right now,” said Luke Spajic, head of portfolio management for Asia emerging markets at Pacific Investment Management Co.

Write to Lingling Wei at lingling.wei@wsj.com

https://www.wsj.com/articles/china-is-striving-to-contain-its-once-diving-now-thriving-yuan-1505046202