Source: Bloomberg
Private talks with insiders and former government officials may charge $ 10,000 per hour.But this industry has recently undergone a change of changes.
For hedging funds and other global investors, to travel freely but have a unprecedented economic power in an opaque but potential profitable economic power, the "expert network" of China's wrongdoing has become a key tool.But for the Chinese government, this mysterious industry has other significance: threats to national security and must be controlled.
The Chinese government also praised the expert network less than ten years ago. Now it is against it and set off a shock wave in the financial industry.Anti -espionage -Kaisheng Rongying, an industry giant with office in Shanghai and New York, has become the focus -once again trigger the observer's doubts, the Chinese government's minds of security and strict control of information, it is expected that it will not help China to attract foreign investors' processes to attract foreign investors.Essence
Examine the expert network, China is not the first one; SAC Capital Advisors and Galleon Group LLC Entering the insider trading scandal broke out. The role played by the expert network made it the focus of the US public in 2010.
The impact of interviews with more than 20 fund managers, consultants and lawyers who are linked to the expert network may have a long -term impact on Chinese investor confidence.Some of the companies that have long relying on the industry to respond to their Chinese risk exposure, some are exiting or completely cut off.Expert consultants in overseas are restricted by visiting China. As for those who live in China, they are more and more cautious about whom and their speeches -no matter how close they are with sensitive industries such as semiconductors and national defense.
It is the ability to attract foreign capital to attract foreign capital, and the latter can provide financing for its economic growth.From January to March of this year, foreign direct investment set the largest decline in more than six years, and China's stock and bond markets also faced stable capital outflows.The Political Bureau of the Mainland Government asked local governments to increase foreign investment last month.The Ministry of Commerce set 2023 as "Invest in the Year of China"
Although China tries to attract investors, George Magnus, an economist of China Central Economist at Oxford University, said it was worried about losing control of company information passed to foreigners.This rectification operation will only work harder for the existing decourse momentum.
In recent years, expert networks have developed rapidly in China, becoming an important channel for foreign companies (whether hedge funds, banks, venture capital companies, or multinational companies) to obtain various information from industry trends to government policies.As early as 2016, these companies also received official support. The People's Daily pointed out that the expert platform will become the main driving force for China's economic upgrade.Kaisheng Rongying was praised for his stable compliance framework and overall supervision.
As China strengthens the control of other forms of information and rectifies various industries with a stricter regulatory system, the demand for their services is also increasing.
Kaisheng Rongying has more than 450,000 expert consultants and is the most famous consulting company in China.Other peers include American companies Gerson Lehrman Group Inc., Third Bridge, Alphasights and Lynk Global.Except for Kaisheng Rongying, no company was named by Chinese officials.
According to its prospectus (now shelved) in 2022, Kaisheng Rongying's charging standard ranges from RMB 500 ($ 71) to US $ 10,000 per hour.According to its website, the company was established in 2006 and has more than 2,000 customers, including some top global consulting companies, private equity funds and banks.According to the prospectus, Xu Rujie, the founder and CEO of him, is the largest shareholder and holds 29.4%of the shares.In 2020, the company's market share in the Chinese expert's online industry was 33%.
better understanding of government policies is the main reason to use the expert network.A consultant who asked for anonymous when discussing a sensitive topic mentioned that a typical example involved a car manufacturer to further understand the official tightening of the emission standard plan.The car manufacturer uses the expert network to contact people who work in some associations and are familiar with government thinking to help the company adjust the production plan.
For investors, China's lack of transparency is a potential advantage that can be used greatly.For example, when the government rectifies health food in 2019, an Asian hedge fund uses the information collected from expert networks to conclude that American nutritional supplements companies operating in China will be difficult to sell inventory.The shares of these companies' stocks selling these companies in the next few months have plummeted by 50%of the company's stock price.Due to this sensitive, people familiar with the matter refused to disclose their names.
Red Line
According to a senior analyst of a Bank of America, the cost of consulting with former Chinese government officials is the highest, and the charging fee can reach $ 10,000 per hour; this is the same as the situation in other parts of the world.The analyst said that a former US official charging may be three to four times, and it is added that former Chinese officials usually know where the red line is and is cautious about sharing sensitive information.
However, there are some ways to bypass these red lines.A global investor said that a former official provides suggestions to use hypothetical examples to avoid comments on government policies that have not been disclosed, and can also use words such as "if I invest in my own money".The investor obeyed the hypothetical suggestion of the former official and bought a sluggish securities before rebounding, which proved that this was one of the best transactions of the company that year.
Some dialogue belongs to informal nature, insufficient supervision and supervision, and the themes that some experts talk about are too sensitive, making them the main goal of government review.Gregory Allen, a senior researcher at the Washington Think Tank Strategy and International Research Center (CSIS) Strategic Technology Project, said that after the United States expanded to restrict China in October in October, the situation is even more so.
National Secret
On May 9th, Chinese officials accused Kaisheng Rongying encouraging experts to leak national secrets and accepted some companies' consulting projects. These companies have closely related to foreign intelligence agencies.In order to highlight this, the official media played the lens of relevant departments to enter the Kaisheng Rongying Office, inquire about company personnel and take away the equipment in the golden time.
A few weeks before the accusations of Kaisheng Rongying, the official has asked the employees of the US consulting company Bain China Office.Officials also searched for Misimi, headquartered in New York, in Beijing's office in Beijing, and detained five Chinese employees.The Ministry of Foreign Affairs of China issued a brief statement saying that Mei Si is suspected of illegally operating. In addition, in response to the assault inspection of the Shanghai Office of Bain, the Ministry of Foreign Affairs pointed out that he did not understand the situation.
In response, Kaisheng Rongying issued a statement that the company established the compliance management committee at the Shanghai headquarters to implement the rectification requirements of China's national security organs.Kaisheng Rongying did not reply to the multi -seal evaluation request sent by Bloomberg through email.
More widely, the Chinese government has been strengthening control of potential sensitive information.According to at least three people from different companies, employees of state -owned enterprises have been told this year to receive more security training, including the best practice of conservative secrets.Several people familiar with the matter revealed that Chinese financial data providers such as Wan De has not recently provided detailed data from overseas customers.After checking dozens of securities firms, the Chinese government demanded that domestic securities companies do not spread information involving national security.
Katja Drinhausen, the head of the Political and Social Research Project of the Institute of Merkato China, said that as the leadership puts security and control on economic growth, strict regulatory activities have become more frequent.
Advanced scores of a US bankAnalysts said that since the start of the rectification operation, employees of state -owned enterprises are unwilling to share any data with foreign analysts, and many experts have canceled the scheduled conference call; the analyst uses Kaisheng Rongying every week, he does not want to name it.The analyst said that this made due diligence investigations more difficult and pushed the investment cost in China.
One Asian hedge fund manager said that institutional investors became more cautious about whom who talked with.The fund manager said that since the news that Kaisheng Rongying faced law enforcement operations, his company banned employees from talking with expert consultants in sensitive industries such as defense and chip manufacturing.His company also suspended the use of Kaisheng Rongying until the situation was further clear.
Another hedge fund, which was once Kaisheng Rongying's customers, has suspended all expert networks in China.It also requires China's investment portfolio manager to stop writing and quoting emails from China (including Wan De).
Cancel visits to China
Some expert networks are doing their best to reduce risks.An employee who did not want to disclose his name said that a company headquartered overseas has suspended some projects and temporarily considering the business itinerary of visiting China.
Whether this industry can survive this wave of rectifications, some people are optimistic.An investigation consultant in China in China said that Da Qian investigated Kai Sheng Rongying to send a clear information, that is, the industry needs better self -supervision.
However, this wave of rectification coincides with the relationship between China and the West, and investors are more cautious.Tightening the supervision from technology to real estate and other industries, its changes have made enterprises feel uneasy. The extreme nature of the China Epidemic Prevention and Creation Policy in the past three years has prompted enterprises to find an alternative market.
CHINA Strategies Group President Christopher Johnson said
The actions adopted by Kaisheng Rongying and other companies specifically reflect the Chinese government's claims on better balanced development and security.Once you have to choose one for a while, safety always occupies the upper hand.This is the important information.
