Is Ping An undervalued?

Access Archive

Dear readers,

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—Jeremy Goldkorn and team


1. Is Ping An undervalued?

In a story titled “China’s Insurance Giant Thinks It’s a Tech Company. Maybe It Is” (paywall), The Wall Street Journal profiles Chinese insurance conglomerate Ping An. The WSJ notes: “Because of China’s relatively loose approach in areas such as data privacy, [the insurance and financial services conglomerate] Ping An can use technology in ways its non-Chinese peers could only dream of.”

Aside from the data it has access to, Ping An has also been much more aggressive investing in tech than its very old-fashioned buttoned-up European and American peers. Ping An was a founding investor in Lufax, one of the strongest peer to peer (P2P) lending companies in China that just raised $1.3 billion Series C round of funding, “bringing its valuation to $39.4 billion.” Another part of Ping An, simply named Ping An Technology says it employs 10,000 people working on artificial intelligence and other cutting edge tech.

So Ping An should be a stock market darling. The Wall Street Journal says:

The question, then, is why investors don’t afford Ping An more of a valuation premium. After a 22% rise this year, it’s still priced at just 10 times its expected earnings over the next 12 months, similar to mature European insurers such as AXA SA and Allianz SE .

Political risk may be part of the answer. Unlike in the European Union, where the rules give individuals ultimate power over the data that companies hold on them, in China the state remains the ultimate arbiter of how data is used. Changing whims in Beijing could strike a heavy blow to Ping An’s business model at any point. Until that happens, though, the company could deserve a re-rating.

Other news from the bleeding edge of Chinese fintech:

2. The Great Transpacific blob — Trade war day 253

Believe it or not, it is a full year since Trump first start making specific threats of large-scale tariffs on China. 253 days ago, the first round of those tariffs went into effect, officially launching what we dubbed the “first great Sino-American trade war of the 21st century.”

When the tariff threats were first made, the U.S. Trade Representative had not yet released its “Section 301” report, and Made in China 2025 was still a relatively obscure Chinese industrial policy that mostly just policy wonks in Washington, D.C. followed in detail. That changed very quickly in 2018, and the economic conflict between the U.S. and China expanded to bring numerous concerns about technology, national security, and increasingly, ideological opposition to the forefront of U.S.-China relations. Trade issues might soon find a reasonable resolution, but these other topics are far trickier.

Note: We’ve abandoned using the term “Pacific Reset” as it is simply not accurate. Until we can find a euphonious phrase that means something like “Great Transpacific blob of fear, greed, and uncertainty with a tech cold war on the side,” we’ll stick to “trade war.”

In today’s news from the Great Transpacific blob:

Trade war and tariffs

Huawei

Generalized mutual hostility

—Jeremy Goldkorn and Lucas Niewenhuis

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Our whole team really appreciates your support as Access members. Please chat with us on our Slack channel or contact me anytime at jeremy@supchina.com.

—Jeremy Goldkorn, Editor-in-Chief


p>Here are the stories that caught our eye this week:

  • The figures of China’s electricity output — a more reliable indicator of economic conditions than GDP numbers — rose 6.7 percent in February. That was one of a few signs mentioned in a speech on March 12 by the head of the National Bureau of Statistics (NBS).

  • As many as 1.5 million Muslims in Xinjiang have been detained in what the government calls “vocational training centers,” but which function as political indoctrination camps, according to new estimates by scholar Adrian Zenz. The U.S. Department of State is now issuing statements about Xinjiang that are far more specific and condemn the human rights abuses in much stronger terms than anything in 2018. The U.S., U.K., and Germany have added to calls to allow the UN access to Xinjiang to conduct an independent assessment of arbitrary detentions, which human rights chief Michelle Bachelet has been requesting for at least three months.

  • China once again blocked a UN resolution, long sought by India, and this time proposed by the U.S., U.K., and France to designate Masood Azhar, leader of Jaish-e-Mohammad (JeM), as a terrorist. Despite JeM claiming responsibility for a terrorist attack in Kashmir that killed more than 40 people, China appears unwilling to single out this group, likely because it does not want to upset its “all-weather friend” Pakistan, where JeM is based, and because Beijing worries that JeM could end up targeting Xinjiang in the future.

  • Tariff indecision will continue for at least several more weeks, as Bloomberg reported that “a hoped-for summit at Trump’s Mar-a-Lago resort will now take place at the end of April if it happens at all.”

  • The EU joined the Huawei fray, without mentioning its name, with a paper that labeled China an “economic competitor” and spoke of the importance of security in 5G networks.

  • Cindy Yang (Yáng Lì 杨莅), a Chinese businesswoman in southern Florida who founded sketchy massage parlors and sold Chinese executives access to Trump’s Mar-a-Lago club, has been fired from the National Committee of Asian American Republicans. Reporting also shows that she has links to the Communist Party’s United Front.

  • China grounded all Boeing 737 Max 8 planes in the country, after a second crash involving the aircraft occurred in Ethiopia, just five months after a crash in Indonesia. Media highlighted the potential impact this development could have on the future of China’s competitor to the Boeing 737, the Comac C919.

  • The Organisation of Islamic Cooperation (OIC), which calls itself “the collective voice of the Muslim world,” abandoned the Uyghurs in a statement that actually praised China for its treatment of Muslims.

  • Top think tank leaders in the U.S. signed a joint statement calling for the release of Canadian Michael Kovrig, saying his detention in Beijing had a “chilling effect” on U.S.-China relations.

  • “Payday loan diplomacy” is the term the new U.S. ambassador to Australia used to criticize Chinese influence in the Pacific.

  • Girls’ Day, March 7, was a shameful mess on Chinese campuses this year, just like last year. One radical activist at China University of Political Science and Law took to burning the sexist signs she saw hung up by her male peers.

  • Chinese boy group survival reality show Idol Producer (青春有你 qīngchūn yǒu nǐ) made a comeback on March 8 after skipping an episode without explanation, worrying fans. But when it came back, all the contestants who dyed their hair bright colors were given special treatment in post-production, which made their hair look black or dark brown. Is Chinese TV’s ban on bright hair color back?

  • Traditional Chinese medicine: Might the long-standing reluctance to properly test the methods and herbal remedies of (TCM) be over? State media reported that the first medical center specializing in “TCM evidence-based research” was established.

  • Parents clashed with police at a Chengdu private school after they discovered that food covered in mold was served to their children.


BUSINESS AND TECHNOLOGY:

POLITICS AND CURRENT AFFAIRS:

China Foreign Minister Shah Mehmood Qureshi is scheduled to travel to China on Sunday, sources informed Geo News, as the government has decided to hold a “strategic consultation” with Beijing.

The two friendly nations will be holding a dialogue to discuss the security situation in the South Asian region as well as the ongoing Indo-Pak tensions that fired up after the tragic Pulwama attack and air combat between the air forces of Islamabad and New Delhi.

SOCIETY AND CULTURE:


VIDEO ON SUPCHINA

Highlights of Chinese Premier Li Keqiang’s press conference

During the two-hour-long press conference in Beijing on Friday, Chinese Premier Li Keqiang answered questions from journalists at home and abroad. He addressed foreign investors’ concerns about accessing China’s domestic markets, shared his views on the current trade war between China and the U.S., and showed confidence in the country’s financial sector.

We also published the following videos this week:


FEATURED ON SUPCHINA

Domestic workers in China: Invisible, vulnerable, and indispensable

Domestic workers globally often operate in a nexus of vulnerability due to the demographic they belong in, society’s view of the work they do, and the nature of the work itself. This is especially true in China. But scarce reporting has focused on the laborers themselves, the human element — who these people are and why they do what they do, despite often not being afforded any workers’ rights or benefits.

Guangzhou subway picks fight with Chinese Goth, because ‘horrifying’

China’s Goth community (if there is one) recently found itself at the center of attention after a woman in full Goth attire was barred from taking the subway in Guangzhou because of her “horrifying” look. According to the disgruntled Goth, the incident happened on March 10 at a subway station in Guangzhou. When going through a security check, the woman was stopped by a subway staff member who asked her to remove her makeup because it’s “problematic and horrifying.”

Chinese people don’t need to be saved from their English names

As a Singaporean with a Chinese name who’s spent half of her life living in places where most people don’t speak Chinese, Jing Xuan Teng has had a strange relationship with her name. She’s also given lots of thought to the practice, common for many Asians abroad, of adopting an English name. In this op-ed, Teng argues: Don’t assume that those who do it are seeking Western approval, don’t assume that people who use English names to assimilate don’t know the worth of their own culture, and don’t assume that unusual English names are the result of insufficient knowledge.

China’s intellectual dark web and its most active fanatic

Liu Zhongjing 刘仲敬, with his philosophy called “Auntology,” built a name for himself by espousing aggressively anti-leftist and anti-progressive views, becoming the forefather of what may well be termed China’s “intellectual dark web” (borrowing the phrase coined in early 2018 by Eric Weinstein to describe a network of “renegades” in academia and media who reject identity politics in the name of “free speech”). But Liu’s views are dismissed by many critics — even those who share his worldview — as extreme; he’s reserved his most controversial — and dangerous — opinions for the Chinese state itself: new regionalism, de-Sinification, and support of separatist movements like those in Hong Kong, Taiwan, Xinjiang, and Tibet.

Students at China’s top university given ‘political loyalty’ surveys

A curious survey handed out last week to some Chinese master’s and Ph.D. students at Peking University, recognized by many as the only “free-thinking” university in China, suggests that the National Party Congress could also become a pretext for conducting a yearly checkup on the state of China’s most precious elite students. Rather than ask questions about the students’ mental health, career plans, etc., the survey seemed to be a poorly disguised interrogation about the students’ political loyalty, blatantly pandering to Xi Jinping and the CCP.

U.S. campaign against Huawei stalls as Europe becomes main battleground

The U.S. is arguing that using Huawei equipment would endanger the privacy and liberty of citizens, and the security of critical infrastructure and national security systems. Nobody was making this argument in 2018. What changed? The answer revolves around growing U.S. government concerns over the dominance of Huawei in the networks of allies and “like-minded” democracies in Europe and Asia. Meanwhile, for Europeans, the U.S. needs to make a stronger legal commitment and not just push for a ban. It is easy for the U.S. to argue for a ban, since there is no Huawei equipment in its major networks. Europe requires a different approach.

A $22 million soccer museum in China makes claim as the ‘birthplace of football’

Sepp Blatter, the former president of FIFA, is not a popular man. But in Zibo, a prefecture-level city of 4.5 million in Shandong Province, his bronze-cast signature continues to grace the entrance of the Linzi Football Museum, all because he declared in 2005 that Zibo was the birthplace of world football some 2,000 years ago. But Blatter’s fixation on soccer’s supposed predecessor — Cuju — was not born of innate historical and archaeological interest. Of course, just as FIFA had financial interests in China, China has political interests in FIFA — specifically, it wants to host a World Cup.

Kuora: All the ways women had to rise above oppression in China

Of the myriad ways in which women were oppressed in China, probably the most glaring and cruelest form of oppression was the practice of foot binding, which was first noted in the Tang dynasty. Chinese society has for most of recorded history been very unequal — and remains so in many ways today, for all the progress that’s been made.

Chinese proposal aims to clean up live streaming in the name of underage internet users

The All-China Youth Federation, a government-backed organization affiliated with the Communist Youth League of China, has introduced a proposal to limit minors’ access to online games while protecting their identities online. The initiative hones in on the live-streaming industry, which has exploded in China in recent years.


SINICA PODCAST NETWORK

Sinica Podcast: Is there really an epidemic of self-censorship among China scholars?

This week’s Sinica was recorded at UPenn’s Center for Study on Contemporary China. Jeremy and Kaiser speak with three prominent scholars on China: Sheena Greitens, associate professor of political science at the University of Missouri, Rory Truex, assistant professor of politics and public affairs at Princeton University, and Neysun Mahboubi, research scholar at the Center for the Study of Contemporary China at the University of Pennsylvania. The group tackles a topic that has long beleaguered China-watching circles: self-censorship. In addition, it focuses on a paper that Sheena and Rory published last summer, Repressive Experiences among China Scholars: New Evidence from Survey Data.

TechBuzz China: Ep. 40: China’s Newest Stock Exchange Experiment: Shanghai’s Technology Innovation Board

In Episode 40 of TechBuzz China, co-hosts Ying-Ying Lu and Rui Ma talk about the new “Technology Innovation Board” on the Shanghai Stock Exchange, which formally announced its first set of rules last week. Rui and Ying-Ying explain that given its recent trajectory, this registration-based NASDAQ-style board could be launched in a few months, if not weeks — much more quickly than skeptics have assumed. With this news as the backdrop, this week’s episode serves as a quick primer into the differences between China and the U.S.’s capital markets, as well as how these contrasts may explain some of the differences in Chinese tech entrepreneurship and capital versus those in the U.S.

ChinaEconTalk: One hour, Two Sessions

China’s Two Sessions, the national annual gathering of the leadership of the People’s Republic of China, will soon be coming to a close. This week on ChinaEconTalk, Jordan sat down with Chris Beddor, a columnist for Reuters Breakingviews, to discuss highlights from this year’s gathering, including state-owned enterprise reform, implications for Made in China 2025, the evolving role of Li Keqiang, and more.

NüVoices: Shui, on Beijing’s zine scene

In the 12th episode of the NüVoices podcast, Alice Xin Liu and Sophie Lu interview Shuilam Wong, who goes by Shui, a comic artist who partnered with Jinna Kaneko to create the Hole in the Wall Collective. The two high school friends met back in the city and decided to create their own indie zine (self-published magazine).

Middle Earth: Episode #4: Movie co-production in China

Until the 1990s, Hollywood movies were making the vast majority of their revenue in English-speaking countries. Nowadays, these countries comprise only half the market. The main reason for the change is the appearance of new markets, including the most important one of all: China. What problems do foreign film professionals and their teams face while vying to tap into the Chinese market? How do cultural disparities and regulations fit into the equation? What is the current lay of the land in the Chinese film industry from the perspective of a director or a producer? In this episode, our guests provide their firsthand experience to answer these questions.

The Caixin-Sinica Business Brief, episode 79

This week on the Caixin-Sinica Business Brief: The death of Chu Shijian 褚时健, recent news about China’s ambition to build 5G networks worldwide, the opening of a Communist-hero-themed KFC in China, the podcast’s co-producer Tanner Brown on the two big political meetings happening in Beijing, and more.


PHOTO OF THE DAY

Snow day in Xinjiang

A police officer clears snow in Urumqi Bazaar, one of the most popular tourist attractions in the city. This image is part of a photo essay that Daniel Hinks contributed for SupChina.