State control cripples Chinese equity thesis
The bearish case for Chinese equities argues that the Communist Party's reassertion of absolute control over private enterprises makes the regulatory environment too unpredictable for foreign capital.
The argument
The guest highlighted sudden, unpredictable crackdowns on the tutoring, tech, and brokerage sectors, alongside the requirement for Communist Party shadow boards in private firms. This structural shift has disillusioned foreign investors, as even highly successful founders like Jack Ma are not off-limits.
The thesis, stress-tested
✓ What validates it
- ✓Further state-mandated restructurings of major tech platforms
- ✓Implementation of new capital flight or gaming taxes
▸ Risks discussed
- ▸Potential for sudden, unpredicted regulatory crackdowns on new sectors
- ▸Geopolitical escalation and US tariffs further harming Chinese exports
Hear it yourself
"So I wouldn't say that the memory chip cycle is over. I in fact, I'm not able to to confidently predict how the cycle is going to move, but I'm also very, very confident that these Chinese competitors that have been trying to improve their yields, they are now very profitable, and they will come with new supply in 2027 onwards. So it does not seem like there's any real, like, longer term constraints. It's just a question of how long is the lead time until we get a supply response. So for me, this will be extremely speculative to to, to enter, you know, cheap company commoditized company commodity companies at 10 times book or whatever they are right now."
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