Vanke in trouble; US politicians flip flop on TikTok; Xiaohongshu RedNote's fleeting moment?
The PRC Ambassador to the US announced that Vice President Han Zheng will attend President-elect Trump’s inauguration:
Who will attend from Taiwan, and was that a consideration for the PRC side?
Summary of today’s top items:
1. Vanke CEO taken away, Shenzhen sends in task force - The Economic Observer broke the news that the CEO of real estate giant Vanke 万科 has been taken away by investigators, and that a government task force in Shenzhen “has fully intervened in Vanke, and the company may face takeover and restructuring.” The Shenzhen government is Vanke’s largest shareholder, once among the most respected developer in China, now apparently circling the drain like most of the other developers. The Economic Observer also notes in its article on the government task force that “this is not the first time a real estate company headquartered in Guangdong has been managed by the local government. In December 2021, at the request of Evergrande Real Estate Group Co., Ltd., the Guangdong Provincial Government agreed to send a working group to Evergrande Real Estate Group to supervise and promote the company's risk disposal work”.
2. Treasury Secretary nominee Bessent’s China comments - Scott Bessent testified on Capitol Hill today as part of his confirmation process. Beijing officials will probably not be pleased with his comments that the PRC economy is in a recession if not actually a depression. They probably also will not like his suggestion that the Trump Administration may push for the PRC to live up to its commitments from phase one of the failed Trump 1.0 trade deal, and might even ask for a “catch-up provision”, saying “China has not made good on their ag purchases for four years…If confirmed, next week I would start pushing for them to resume the purchases and then I would conference with President Trump on whether he believes there should be a makeup provision”.
3. TikTok should be OK - TikTok called American politicians’ bluff with its announced intention to shut it down on January 19, and politicians on both sides are caving, in spite of the law for which almost all of them voted. There is a bipartisan scramble to figure out how to keep the service alive. The Supreme Court has scheduled an announcement of opinions starting at 10AM ET Friday, and so perhaps the court will put the feckless politicians out of their misery by either overturning the law or issuing an injunction or administrative stay. This whole process has not only been gross but also embarrassing, and it will be interesting what lessons Xi and his team take away from this whole mess.
4. Xiaohongshu/RedNote moment - The surge of TikTok users to Xiaohongshu/RedNote has been interesting, and fun to watch, but I am skeptical it will last, both because TikTok is likely to get a reprieve and because PRC cyber regulators can not be comfortable with the spontaneous interactions. The Information reports that officials have told the company it “needs to ensure China-based users can’t see posts from U.S. users”. On the one hand, the Ministry of Foreign Affairs is undertaking an aggressive effort to project openness and build people-to-people engagement with the US, so this influx of Americans to RedNote should be a good thing. But on the other, more powerful, regulatory hand this influx of Americans threatens the information management regime and so is likely seen as a political security threat. If regulators wanted to be clever, perhaps they could create a walled garden within Xiaohongshu/RedNote where the foreigners can gather and post, while on the Chinese side only “politically reliable” users are allowed so the foreigners will think they’re having an authentic Chinese Internet experience and learning about real life in China, but in fact it would just be another managed people-to-people engagement. That may be too complicated, and Xiaohongshu/RedNote will instead just create a separate area for foreigners. It would be nice if the unfiltered engagements could continue, but allowing that would require a real shift in how the Party manages the Internet. Still, there may be upside for Xiaohongshu/RedNote and its investors, as if they go public overseas the brand recognition from this surge in overseas usage may also drive a surge in interest in the IPO.