China

[Luke]

42 minutes ago, Spekulatius said:

You cannot move capital out of China without regulatory approval. This is true for domestic as well as subsidies of foreign companies.

 

The Yuan is not freely convertible into other currencies either.

 

3 hours ago, crs223 said:

 

According to ChatGPT, this would not be a viable option to return capital to shareholders:

 

 

Alibaba wants to return more USD to shareholders via buybacks and dividends on the NYSE but it was run out of USD.  Can Alibaba bypass CCP capital controls and simply exchange their CNY to CNH and then to USD?

 

 

Alibaba, like other Chinese companies, faces strict capital controls imposed by the Chinese government, which regulate the conversion and outflow of renminbi (RMB) into foreign currencies like USD. Here's why the approach you suggested—converting CNY to CNH and then to USD—would not be a simple workaround:

1. CNY vs. CNH: CNY (onshore renminbi) is subject to strict regulatory oversight by the People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE), while CNH (offshore renminbi) is traded more freely in markets like Hong Kong. However, converting large amounts of CNY to CNH is still monitored and restricted.

2. Capital Controls on CNY-CNH Conversions: Even though CNH is more freely traded, the ability of a Chinese company like Alibaba to convert onshore CNY to CNH is not unlimited. The Chinese government carefully monitors and restricts large conversions to prevent capital flight.

3. USD Liquidity Constraints in Offshore Markets: While CNH can be converted to USD in offshore markets, it would still require sufficient USD liquidity. If Alibaba attempted to do this at scale, authorities would likely intervene.

4. Regulatory Oversight: Given Alibaba’s prominence, any large-scale attempt to bypass capital controls would likely attract regulatory scrutiny, leading to potential penalties or restrictions on future transactions.

Isnt Alibaba also mainland listed now and can just buy back shares locally without this USD conversion problem?

[rogermunibond]

Not sure what the big deal is.  PetroChina, a state owned enterprise, has been making dividend payments to shareholders since the 2000s.

 

Sure the VIE is cumbersome and has never had its regulatory status "blessed" but there are SOEs that have listed using the VIE.

 

And China VIE controlled companies have made dividend payments to ADR/ADS over the last 4-5 years.  No issues.

 

SAFE review and approval, but if you read the rules it's mostly related to payment of dividends or share buybacks funded from retained earnings.

[crs223]

2 hours ago, rogermunibond said:

Not sure what the big deal is.  PetroChina, a state owned enterprise, has been making dividend payments to shareholders since the 2000s.

 

Sure the VIE is cumbersome and has never had its regulatory status "blessed" but there are SOEs that have listed using the VIE.

 

And China VIE controlled companies have made dividend payments to ADR/ADS over the last 4-5 years.  No issues.

 

SAFE review and approval, but if you read the rules it's mostly related to payment of dividends or share buybacks funded from retained earnings.

 

BABA could not get enough USD to perform buybacks last year... so they issued convertible bonds denominated in USD to fund the buybacks.