Chinese Shareholders Rush to ‘Cash Out’ as CCP Tries to Prevent Capital Flight
News AnalysisGuangdong DP Co., Jinke Property Group, and Country Garden Service Holdings all announced massive stock sell-offs in November and December. The Chinese companies are just the latest to announce major sell-offs. Experts speculate that the stock sales are part of an increasing trend by China’s super wealthy to cash out and leave the country. The sell-offs come as the Chinese regime cracks down on illegal stock sales, the latest in a series of regulatory crackdowns over the past few years as the CCP returns to a state-controlled economy. The moves are aimed to counter outflows of capital as many of the country’s super-wealthy seek to leave China. They are part of a vicious cycle as China attempts to corner capital through fines, regulations, and coerced donations, further spooking Chinese companies. Guangdong DP, Jinke, Country Gardens Sell-Off On Dec. 5, according to a Reuters report, Guangdong DP Co.—a major supplier of LED lighting products—disclosed that its controlling shareholder would unload a 6 percent stake in the company. Based on Guangdong DP’s Dec. 5 closing price of 15.2 yuan/share ($2.18/share), the reduction of cash amounted to about 415 million yuan (about $57.4 million). The company’s current market value is only 2.432 billion yuan (about $336 million). Guangdong DP Co. was listed as a public company on Nov. 29, 2019. In the three years from 2019 to 2021, the company’s performance declined continuously. This year, the gross profit margin of its main business dropped abruptly to 8.95 percent from 21.51 percent last year. On Nov. 29, real estate company Jinke Property Group announced that two shareholders—Jinke Holdings and Huang Hongyun—had reduced their holdings in the company by 89.5 million shares, accounting for 1.68 percent of the total shared capital of the company. On Dec. 5, China’s Shenzhen Stock Exchange issued a supervisory letter alleging the following violations by the Jinke Property Group shareholders: failure to disclose the reduction of shares in advance, reduction of shares during the restricted period, and over-proportional reduction of shares. On Dec. 12, the South China Morning Post reported that Yang Huiyan, China’s richest woman, planned to sell about 7 percent of her stake in Country Garden Services Holdings, cashing in HK $5.055 billion ($649 million). According to independent real estate news site Mingtiandi, the sell-off marked the third major sale of equity in the Country Garden Holdings since late November. Crackdown on Illegal Stock Sales In an attempt to limit major stock sell-offs, the Chinese regime is cracking down on illegal stock sales. According to Chinese state media Xinhua News, this year at least 30 companies and 60 shareholders received regulatory fines for non-compliance in their sale of shareholdings. In November alone, nine A-share listed companies issued an apology announcement on behalf of shareholders and executives who violated the law. Most companies blamed the illegal sales on “mismanagement.” Chinese digital news The Paper cited a total of 23 listed companies and related parties being investigated by the Securities and Futures Commission in November, an average of one new company investigated each day, as the month had only 22 trading days. Most investigations involved suspected violations over information disclosure. In contrast, September and October saw a much smaller number of companies investigated: five and three investigations of listed companies respectively; while July saw 16 cases reported. Also in November, billionaire brothers Paul Xiaoming Lee and Li Xiaohua, chairman and vice chairman of Yunnan Energy New Materials Co., Ltd., were placed under house arrest pending investigation. Between Aug. 2020 and June 2022, the Li family had reduced its holdings in Yunnan Energy by about 54 million shares, worth about $549 million. Expert: Stock Sales Part of Wealthy Exodus Experts speculate that the stock sales are part of a rush to leave China by the super wealthy. Li Yanming, a U.S.-based China expert and commentator, told The Epoch Times on Dec. 1 that China’s rich and powerful started accelerating their asset sales and seeking to leave China, both before and after the CCP’s 20th Congress. The flight is motivated by several factors: COVID-19 lockdowns, concerns about safety and security amid regulatory crackdowns, and a loss of confidence in the Chinese Communist Party (CCP). The number of internet searches mentioning the keyword “emigration” spiked more than 100-fold this spring during widespread COVID lockdowns, according to a Radio Free Asia report. Ten thousand people sought to leave China in 2022, according to the Henley Global Citizens Report, which tracks wealth migration. ‘Common Prosperity’ Accelerates Flight Although the emigration trend is not new, Li believes it accelerated after the CCP’s 20th Congress in October, involving the country’s wealthy and entrepreneurial circles. The day after the
Udumbara
News Analysis
Guangdong DP Co., Jinke Property Group, and Country Garden Service Holdings all announced massive stock sell-offs in November and December. The Chinese companies are just the latest to announce major sell-offs. Experts speculate that the stock sales are part of an increasing trend by China’s super wealthy to cash out and leave the country.
The sell-offs come as the Chinese regime cracks down on illegal stock sales, the latest in a series of regulatory crackdowns over the past few years as the CCP returns to a state-controlled economy.
The moves are aimed to counter outflows of capital as many of the country’s super-wealthy seek to leave China. They are part of a vicious cycle as China attempts to corner capital through fines, regulations, and coerced donations, further spooking Chinese companies.
Guangdong DP, Jinke, Country Gardens Sell-Off
On Dec. 5, according to a Reuters report, Guangdong DP Co.—a major supplier of LED lighting products—disclosed that its controlling shareholder would unload a 6 percent stake in the company. Based on Guangdong DP’s Dec. 5 closing price of 15.2 yuan/share ($2.18/share), the reduction of cash amounted to about 415 million yuan (about $57.4 million). The company’s current market value is only 2.432 billion yuan (about $336 million).
Guangdong DP Co. was listed as a public company on Nov. 29, 2019. In the three years from 2019 to 2021, the company’s performance declined continuously. This year, the gross profit margin of its main business dropped abruptly to 8.95 percent from 21.51 percent last year.
On Nov. 29, real estate company Jinke Property Group announced that two shareholders—Jinke Holdings and Huang Hongyun—had reduced their holdings in the company by 89.5 million shares, accounting for 1.68 percent of the total shared capital of the company.
On Dec. 5, China’s Shenzhen Stock Exchange issued a supervisory letter alleging the following violations by the Jinke Property Group shareholders: failure to disclose the reduction of shares in advance, reduction of shares during the restricted period, and over-proportional reduction of shares.
On Dec. 12, the South China Morning Post reported that Yang Huiyan, China’s richest woman, planned to sell about 7 percent of her stake in Country Garden Services Holdings, cashing in HK $5.055 billion ($649 million).
According to independent real estate news site Mingtiandi, the sell-off marked the third major sale of equity in the Country Garden Holdings since late November.
Crackdown on Illegal Stock Sales
In an attempt to limit major stock sell-offs, the Chinese regime is cracking down on illegal stock sales.
According to Chinese state media Xinhua News, this year at least 30 companies and 60 shareholders received regulatory fines for non-compliance in their sale of shareholdings. In November alone, nine A-share listed companies issued an apology announcement on behalf of shareholders and executives who violated the law. Most companies blamed the illegal sales on “mismanagement.”
Chinese digital news The Paper cited a total of 23 listed companies and related parties being investigated by the Securities and Futures Commission in November, an average of one new company investigated each day, as the month had only 22 trading days. Most investigations involved suspected violations over information disclosure.
In contrast, September and October saw a much smaller number of companies investigated: five and three investigations of listed companies respectively; while July saw 16 cases reported.
Also in November, billionaire brothers Paul Xiaoming Lee and Li Xiaohua, chairman and vice chairman of Yunnan Energy New Materials Co., Ltd., were placed under house arrest pending investigation. Between Aug. 2020 and June 2022, the Li family had reduced its holdings in Yunnan Energy by about 54 million shares, worth about $549 million.
Expert: Stock Sales Part of Wealthy Exodus
Experts speculate that the stock sales are part of a rush to leave China by the super wealthy.
Li Yanming, a U.S.-based China expert and commentator, told The Epoch Times on Dec. 1 that China’s rich and powerful started accelerating their asset sales and seeking to leave China, both before and after the CCP’s 20th Congress.
The flight is motivated by several factors: COVID-19 lockdowns, concerns about safety and security amid regulatory crackdowns, and a loss of confidence in the Chinese Communist Party (CCP).
The number of internet searches mentioning the keyword “emigration” spiked more than 100-fold this spring during widespread COVID lockdowns, according to a Radio Free Asia report.
Ten thousand people sought to leave China in 2022, according to the Henley Global Citizens Report, which tracks wealth migration.
‘Common Prosperity’ Accelerates Flight
Although the emigration trend is not new, Li believes it accelerated after the CCP’s 20th Congress in October, involving the country’s wealthy and entrepreneurial circles. The day after the first public appearance of the new Politburo on Oct. 23, Hong Kong stocks plummeted and foreign investors withdrew their capital in a hurry.
The wealthy are increasingly worried about their safety and security, in addition to tax investigations and the confiscation of property by the CCP. Companies and individuals are rushing to protect their capital.
The party has grabbed billions by fining tech, gaming, and other companies over the past few years. Further, it has strong-armed companies into donating millions to fund projects for education, agritech, and poverty alleviation, in line with China’s new emphasis on “common prosperity” as opposed to individual wealth.
CCP: No More Running Away
In a more overt move to counter capital flight, China is proposing intervention policies to deal with wealthy individuals running away. The policies include restrictions on “malicious emigration.”
A Dec. 1 article on state-run media NetEase reported that the regime’s China Banking and Insurance Regulatory Commission (CBIRC) will increase the scale of trust cash management in the future and take a multi-pronged approach to effectively prevent large movements of “national assets.”
The article attacked the wealthy for making money in China and then moving overseas with their wealth.
