Latest news with #VictorShih
Hans India
20-05-2025
- Automotive
- Hans India
Trade Tensions Shape CATL's Hong Kong Market Debut, Shutting Out U.S. Investors
Shares of Chinese battery giant Contemporary Amperex Technology Ltd. (CATL) soared 16% on their first day of trading in Hong Kong, marking the world's largest stock listing so far in 2025. But while the debut drew international interest, U.S. onshore investors were notably absent—shut out amid deepening financial tensions between Washington and Beijing. The exclusion highlights the accelerating financial 'decoupling' between the two global powers, with CATL, the world's leading electric vehicle battery maker, caught in the middle. Already a dominant force in the industry, CATL supplies batteries to global automakers including Tesla and General Motors, and is now pushing further into Europe with a new plant in Hungary. Yet, geopolitics loomed large over the listing. The U.S. government has ramped up efforts to limit Chinese companies' access to American capital, citing national security concerns. CATL, previously labeled a "Chinese military company" by the Pentagon, faced pressure from U.S. lawmakers who urged Wall Street banks to pull out of the deal. The company also faces tariffs and increasing scrutiny from U.S. regulators. In response to these tensions, CATL restructured its offering to a Regulation S (Reg S) listing—effectively blocking onshore U.S. investors by avoiding certain U.S. regulatory disclosures. While major global funds like Kuwait's sovereign wealth fund, Oaktree Capital Management, and Hillhouse Capital joined the deal, many American investors were left on the sidelines. 'We are headed toward full financial decoupling with China,' said Stephen Roach, former Morgan Stanley Asia chairman. He warned that U.S.-listed Chinese firms could be next in line for further restrictions. The contrast with past market enthusiasm is stark. A decade ago, Alibaba's $21.8 billion IPO on the New York Stock Exchange drew massive fanfare. Now, the exclusion of U.S. investors from CATL's $4.6 billion Hong Kong listing signals a dramatic shift. The U.S. has tightened investment restrictions over concerns that American capital could help advance China's military and tech ambitions. A proposed Ford battery plant in Michigan using CATL technology has faced bipartisan criticism, and lawmakers are pushing to revoke subsidies from U.S. companies that rely on Chinese tech. Despite the headwinds, CATL's strong debut underscores its global appeal. Its batteries are lighter, cheaper, and faster-charging—crucial advantages in the EV race. The company's regulatory filings acknowledge the risks of growing trade tensions but remain focused on international expansion. In a statement responding to the Pentagon's classification, CATL insisted it has never participated in military-related activities and has engaged with the U.S. Department of Defense to contest the label. Although some U.S. institutions can still invest in CATL shares via offshore accounts, the regulatory wall is significant. Victor Shih, a China finance expert at the University of California, San Diego, estimates around 10% of U.S. investors might have bought into the offering if allowed. 'This is a major milestone,' Shih said. 'We're likely seeing the beginning of a broader trend—one that will cut U.S. investors out of future Chinese tech opportunities.'
Mint
21-04-2025
- Business
- Mint
DeepSeek's AI surprised the world. China's universities are the talent source.
In the global contest for artificial intelligence supremacy, the U.S. and China are often portrayed as the primary contenders. While the U.S. maintains a lead in AI innovation, China is rapidly closing the gap, driven by a surge in research output, substantial investments, and strategic governmental policies. 'It is not surprising that China now competes closely with the U.S. for leadership in AI talent. It trains by far a larger number of engineers and computer scientists than the U.S., although the U.S. still has an edge in attracting the best global talent, including from China," said Victor Shih, director of the 21st Century China Center at the University of California, San Diego. 'For now, the capital market for start-ups in the U.S. still functions much better than in China, but if the current turmoil turns into a prolonged recession, that advantage will be eroded," he told Barron's. China leads globally in the number of AI-related publications and patents, according to Stanford University's 2025 AI Index. This great leap is bolstered by significant government support and a strategic vision aiming for tech self-sufficiency. A pivotal moment in China's AI trajectory was the emergence of DeepSeek's R1 model, which rivals top U.S. models despite limited access to advanced computing resources—particularly semiconductor chips—due to U.S. export restrictions. DeepSeek's success intensified domestic competition—tech giants in China and start-ups tied to China's elite universities are vying for dominance in the sector. The landscape is characterized by fierce competition among established tech conglomerates—often referred to as the 'BAT" trio: Baidu, Alibaba Group Holding, and Tencent Holding—and a new wave of dynamic start-ups. Companies like Zhipu AI, MiniMax, and Moonshot AI have rapidly gained prominence, earning the nickname 'AI Tigers" from investors. These start-ups aren't only innovating at breakneck speed but are also attracting substantial investments, signaling a robust and competitive ecosystem. Tencent, for instance, has upgraded its Hunyuan T1 model to compete with DeepSeek and Alibaba. Baidu has launched new models, ERNIE 4.5 and ERNIE X1, which it plans to integrate into China's most popular search engine. This internal competition is further amplified by the open-source approach adopted by many Chinese firms. While open-sourcing AI models fosters collaboration and accelerates innovation, it also raises questions about revenue generation and potential exploitation by international competitors. Chinese universities have become pivotal to the nation's AI advancement, significantly contributing to research output and talent cultivation. Recent data place Peking University, Tsinghua University, and Zhejiang University at the top of the charts in AI research publications. Notably, Peking University has topped global lists of institutions ranked by AI research output since 2022, according to AIRankings. Peking University's AI institute said it referred requests for comment to professors, though none replied. Tsinghua University and Zhejiang University didn't respond to requests for comment. The success of AI start-ups like DeepSeek can be attributed, in part, to the robust talent pool emerging from these universities. DeepSeek's founder, Liang Wenfeng, is a graduate of Zhejiang University, and the company's team comprises young scientists, many of whom are fresh graduates from institutions such as Tsinghua and Peking University. This collaboration between academia and industry facilitates a seamless transition from cutting-edge research to real-world AI applications. 'When I was at Beida [Peking University], AI students were leaving or finishing their coursework to start companies—you'd hear about something new like every week," said James Liu, who is now pursuing a doctorate at MIT after receiving his bachelor's degree in China. Despite these advancements, China's AI sector faces significant challenges. U.S. export restrictions have limited China's ability to procure high-end AI chips, compelling domestic companies to seek alternatives and innovate with available resources. This constraint has spurred efforts to develop indigenous chip-making capabilities, but achieving parity with global leaders remains formidable. Moreover, the intense domestic competition necessitates strategic collaborations and a focus on niche areas to differentiate offerings. Companies are increasingly forming partnerships, both domestically and internationally, to leverage complementary strengths and navigate the complex AI landscape. Zhu Songchun—arguably the most renowned figure in the Chinese AI world—returned to China from the University of California, Los Angeles, in 2020 to head Peking University's Institute for Artificial Intelligence and its School of Intelligence Science and Technology. At a recent conference in Beijing, his keynote address summarized the zeitgeist. 'Creating world-class technology through Chinese thinking is our goal and our responsibility," he said. 'China is fully capable of taking the initiative in the era of general AI." Write to editors@
South China Morning Post
03-03-2025
- Business
- South China Morning Post
Ebbing demand for Maotai, China's favourite baijiu, adds to debt concerns
In the Chinese village of Maotai, the local firewater named after the town is not only a key source of income, it's a barometer of the country's battered consumer market and the economic misfortunes of its home province. Advertisement In the weeks before Lunar New Year, tourists traditionally flock to the town, nestled in the mountains of the southwestern province of Guizhou, to buy the baijiu, or white spirit, as gifts. This year, those crowds were notably smaller. The premium spirit made locally by Kweichow Moutai has for decades been a fixture at weddings, business dinners and state functions, but its sales in the past two years have been hit by poor consumer and business confidence. Victor Shih, a professor of political science at the University of California San Diego, says Moutai's strong cash flows have been 'an important part of the strategy to help Guizhou's government repay debt that is constantly coming due'. That means any contraction in Moutai's profit constitutes a problem for the government, he added. Shanghai-listed Kweichow Moutai is majority-owned by Moutai Group, in turn wholly owned by Guizhou, China's second-most indebted province. Its contribution to the local economy is enormous, not only as a major employer but also as a vehicle for the province to raise revenue and pay down debt. Inside a Maotai liquor-bottling factory near Chishui River. Photo: Justin Jin Long considered a bellwether of Chinese consumer demand, its retail performance has been squeezed in recent years by wider deflationary pressures.
Reuters
03-03-2025
- Business
- Reuters
Ebbing demand for China's favourite firewater adds to debt concerns
MAOTAI, China, March 3 (Reuters) - In the Chinese village of Maotai, the local firewater named after the town is not only a key source of income, it's a barometer of the country's battered consumer market and the economic misfortunes of its home province. In the weeks before Lunar New Year, tourists traditionally flock to the town, nestled in the mountains of the southwestern province of Guizhou, to buy the baijiu, or white spirit, as gifts - this year, those crowds were notably smaller. The premium spirit made locally by Kweichow Moutai ( opens new tab has for decades been a fixture at weddings, business dinners and state functions, but its sales in the past two years have been hit by poor consumer and business confidence. Victor Shih, a professor of political science at the University of California San Diego, says Moutai's strong cash flows have been "an important part of the strategy to help Guizhou's government repay debt that is constantly coming due". That means any contraction in Moutai's profit constitutes a problem for the government, which "needs that money to repay their debt and to run the government," he added. Shanghai-listed Kweichow Moutai is majority-owned by Moutai Group, in turn wholly owned by Guizhou, China's second-most indebted province. Its contribution to Guizhou's economic development is enormous, not only as a major employer but also as a vehicle for the province to raise revenue and pay down debt. Long considered a bellwether of Chinese consumer demand, its retail performance has been squeezed in recent years by wider deflationary pressures. "Before, people would fly from Beijing to buy bottles of Moutai for more than 3,000 yuan ($412) several times per year," said a shopkeeper at one of the many liquor stores lining the river in Maotai village. "Now you can get a bottle for as little as 1,699 yuan, but the environment is so bad, no-one wants to buy." Kweichow Moutai, the world's largest alcohol company and until last year China's most valuable listed firm with a market value as high as $400 billion, makes its clear spirit from sorghum and has a special place in the nation's history. Premier Zhou Enlai toasted U.S. president Richard Nixon with Moutai on his landmark 1972 China visit. But a persistent slump in sentiment has taken the wind out of Kweichow Moutai's share price and the price consumers are willing to pay for the product. The firm's value has fallen by almost half since hitting a record high in 2021, and the market price of a 500 ml bottle of its flagship 53% proof Feitian "Flying Fairy" last year dropped as much as 22% from 2,700 yuan at the start of 2024. Kweichow Moutai declined an interview request. Guizhou's provincial government did not respond to requests. TURNAROUND TROUBLES To be sure, Kweichow Moutai's revenues are not linked to the market price of the product but to the factory gate price its network of distributors pay. Moutai's 20% bump in factory gate prices for Feitian in late 2023 helped keep revenues above their 15% sales growth target for 2024, according to preliminary results in January. But questions remain over how long this growth will last. Estimates from brokerages and company executives indicate at least 50% of inventory produced by the company over the last decade has not been consumed, but instead held as inventory, often as alternative investments. Some analysts warn a major inventory sell-off could further impact Moutai's market and share prices. UBS research predicted Feitian's market price could fall far below the 2,000 yuan benchmark by mid-2025. A fall in prices, in turn, impacts Moutai's luxury brand. "If you are served Moutai, it means you are important and successful," said George Liu, a private equity manager in Beijing. "If it's cheaper, what's the point of drinking it?" Moutai also faces demographic challenges, according to Ben Cavender, managing director at Shanghai-based China Market Research Group. "Baijiu is traditionally an older man's drink and most consumers under the age of 35 really don't have a taste for it," he said. Chasing younger drinkers, Moutai has collaborated on affordable products like lattes and ice cream, gimmicks that Cavender says haven't had much effect. Company executives have flagged international expansion for potential growth, though it's unlikely to compensate for a domestic slowdown. PROVINCIAL GIANT All of that raises questions about Kweichow Moutai's support for Guizhou. The company's red, white and blue logo is emblazoned on public works across the province. In addition to employing more than 30,000, the company accounts for a fifth of the province's tax receipts and 5% of its GDP. Guizhou has used the company to not only raise revenues and pay down debts but also bail out local highway-builders and contribute to public works such as roads, railways, airports and hospitals. Four years ago, Moutai Group issued a 15 billion yuan bond to buy an expressway, opens new tab. It then transferred for free a $14 billion stake in the listed company to the Guizhou government. By the end of 2023, Guizhou's official provincial debt had reached 1.5 trillion yuan, ballooning 26% from the previous year and accounting for 72% of GDP. That appears to be stabilising, said Yao Yu, founder of credit analysis firm Ratingdog, noting provincial development is mostly dependent on "central transfer payments and local debt issuance" rather than tax revenues from state-owned enterprises like Kweichow Moutai. The broader question is where Guizhou will find new sources of revenue, given its patchy record in firing up new industries, such as big data centres. As it stands, according to Guido Cozzi, professor of macroeconomics at the University of St. Gallen, a slowdown in Moutai's growth limits its ability to financially support Guizhou, "potentially leading to higher borrowing costs and an increased risk of default for the province. ($1 = 7.2801 Chinese yuan)
