Tag Archives: CCP

How China’s Tech Industry Dies

The Chinese Communist Party has launched a severe crackdown on the technology industry:

  • Didi Chuxing, the Chinese equivalent of Uber, had its app removed from all Chinese app stores shortly after its US IPO
  • ByteDance, parent company of TikTok, shelved its IPO plans under regulatory pressure. Its CEO has resigned.
  • Over 30 tech companies have been hauled in for meetings with regulators
  • Ant Group, a financial company founded by Jack Ma that would’ve been among the largest IPOs in history, had its IPO in China cancelled after Ma criticized authorities

This crackdown makes it nearly impossible for Chinese companies to list their shares in the US, removing one of the main ways that venture capitalists cash out. This will cause venture firms to shy away from investing in Chinese companies.

Why does this matter? Let’s take a look at how venture funding works:

1) Company makes product
2) Company pitches investors
3) Investors give company money
4) Company uses money to hire engineers and make a better product, and…
5) Acquire users through ads and/or building their sales team. Next…
6) With more users and revenue, company comes back to VC’s to raise more money at a higher valuation. Then, they do more of 4-5
7) After repeated rounds of VC funding, the company either gets acquired or goes public. VCs cash out.

But Chinese companies cannot go public in the US for the forseeable future, and even a listing in China may not be possible, as Ant Group proved. And if the Chinese authorities think a US listing brings security risks, surely the acquisition of a Chinese tech firm by a US company would be even riskier and thus also off limits.

What does that leave in terms of exits? Acquisition by a Chinese tech company, which means a lot fewer and smaller potential acquirers. The only other option is an IPO in China, providing the company doesn’t offend anyone. But the Chinese stock market is just 1/4th the size of the US one, so the payoff may be much smaller.

No exit means no investment. For VC firms, the exit is the entire point!

Unlike in China, firms in the US and elsewhere will be able to choose whatever exit is the most lucrative. That means they’ll be able to raise venture capital much more easily. That money will let them hire the best engineers, build the best products, and acquire tons of customers, leaving Chinese firms in the dust.

A couple of years ago, I thought the Chinese technology industry might overtake the US. I don’t think that anymore. With the government’s hand ever heavier, I see Chinese technology falling further and further behind.

The Chinese people have proven they have the skills to compete. But will their government let them?

More on tech:

CHINA IS KILLING ITS TECH INDUSTRY

WHY I JUST INVESTED IN GAUGE, THE BEST WAY TO SELL YOUR CAR

WHY I JUST INVESTED IN CRAFTER, MAKER OF THE MOST BEAUTIFUL ARTS AND CRAFTS KITS IN THE WORLD

Photo: “Vice President Xi Jinping” by nznationalparty is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

China Is Killing its Tech Industry

Major news over the holiday weekend as the Chinese government required all app stores in China to remove the Didi Chuxing app. Didi is the Chinese equivalent to Uber, and dominates shared rides in the country, along with a major presence abroad:

China has ordered app-store operators to remove the app of Didi from their stores, the latest as tension escalates between the nation’s largest ride-hailing giant and local regulators. The app has disappeared from several stores including Apple’s App Store in China, TechCrunch can confirm.

The nation’s cyberspace administration, which unveiled the order on Sunday, said Didi was illegally collecting users’ personal data.

Existing users can continue the use the app for now, but new signups are blocked. This comes just days after Didi raised billions in an IPO in New York, perhaps angering the Chinese government.

The claim of data violations seems specious. Didi’s CEO, Li Min, denies that any data is handled improperly or passed to the US.

This is part of a broader crackdown on China’s technology industry:

  • Alibaba Group fined $2.8 billion shortly after CEO Jack Ma criticizes the Communist Party
  • Fintech giant Ant Group, also founded by Jack Ma, has IPO cancelled
  • Bitcoin miners forced to shut down and are racing to move their servers elsewhere, including the US, as the Chinese government prepares to launch its own competing digital currency
  • A Chinese billionaire, many of whom are in the technology industry, dies every 40 days on average, often in suspicious “accidents” and “suicides.” Some are simply executed.

What is this doing to China’s technology industry? The damage is reflected in a massive decline in the number of “unicorns,” or startups reaching $1 billion valuation, in China. Meanwhile, the number of unicorns in the US is skyrocketing and the tech industry as a whole is hotter than ever.

China’s overall economy has also trended sharply downwards in recent years:

The Communist Party doesn’t want any competing power centers, and the Chinese tech industry, with its wealth and control of information, is perhaps the biggest alternative power center left.

But the industry needs freedom to experiment and exchange ideas, and a stable climate without the constant threat of fines, shutdowns and imprisonment. Entrepreneurs can find that here in the US, along with abundant funding. And I think you’ll see more and more of them making that jump.

More on technology:

7 COMPANIES HAD 3 MINUTES EACH TO PITCH US. THIS IS WHAT HAPPENED.

INSIDE A STARTUP ACCELERATOR DEMO DAY

UNICORNS ARE BEING MINTED FASTER THAN EVER

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

How China Could Attack Bitcoin

China is creating its own cryptocurrency, which will allow much easier surveillance and control of their population than existing coins. In order to push bitcoin off its throne and replace it with a digital yuan, China could launch a powerful sneak attack on bitcoin.

In order to push bitcoin off its throne and replace it with a digital yuan, China could launch a powerful sneak attack on bitcoin.

Bitcoin transactions are handled by “miners,” or powerful computers that perform calculations to verify transactions. A report from scholars at Princeton University and Florida International University notes that 74% of this mining power is in groups, or “pools,” managed by China.

That much computing power, also known as hash rate, gives China an unrivaled ability to hack the currency:

One broadly understood security property of Bitcoin is that no single party can control more than 50% of the hash rate, so this statistic is worrying.

Cheap land and energy have helped China dominate bitcoin mining:

These facilities are primarily located in remote areas with inexpensive electricity and cheap land, such as Sichuan province and Inner Mongolia. These advantages allow Chinese miners to achieve greater profit margins than their competitors in other countries; a study in early 2018 found that one bitcoin could be mined in China at 2/3rds the electricity cost of the same operation in the U.S.

One way China could attack bitcoin and its users would be to refuse to deal with certain addresses controlled by dissidents or geopolitical rivals. China could connect IP addresses and e-commerce data with bitcoin wallets in order to crack bitcoin’s anonymity:

With control of at least 51% of the hash rate, Chinese mining pools could simply announce that they will not mine on chains containing transactions from their list of censored addresses.

China could also use a variety of techniques to double-spend coins, which would undermine faith in the bitcoin system as a whole, perhaps paving the way for their own cryptocurrency.

One silver lining is that although nearly 3/4ths of mining capacity is in Chinese-managed pools, this doesn’t mean the computers doing that mining are all physically located in China. Miners can and do join pools managed by groups in other countries. The Communist Party will likely find it much more difficult to control miners abroad.

In all, China’s authoritarian government and massive influence in bitcoin mining represent a real risk to the currency. Crypto enthusiasts should begin preparing responses to possible Chinese attacks before they happen.

Dig into these posts for more on bitcoin :

If you found this post interesting, please share it on Twitter/Reddit/Facebook/etc. using the buttons below. This helps more people find the blog! And please leave a comment at the bottom of the page letting me know what you think and what other information you’re interested in!

Check out the Stuff I Use page for some great deals on products and services I use to improve my health and productivity. They just might help you too!

Photo: “President Kagame and President Xi Jinping of China Joint Press Conference | Kigali, 23 July 2018” by Paul Kagame is licensed under CC BY-NC-ND 2.0

China Hacked Microsoft With Data from Previous Infiltrations

Microsoft Corp. and U.S. government officials are still working to understand how a network of suspected Chinese hacking groups carried out an unusually indiscriminate and far-reaching cyberattack on Microsoft email software, more than a month after the discovery of an operation that rendered hundreds of thousands of small businesses, schools and other organizations vulnerable to intrusion.

A leading theory has emerged in recent weeks, according to people familiar with the matter: The suspected Chinese hackers mined troves of personal information acquired beforehand to carry out the attack.

More here.

Microsoft Exchange servers run Microsoft Outlook, which is used almost universally for e-mail in corporate America. Having access to that is having the keys to the kingdom at almost any company in the country and many abroad.

So where did they get all this personal information? The evidence indicates that it came from prior hacks:

Among the potential sources of the personal data is China’s vast archive of likely billions of personal records its hackers stole over the past decade. The hackers may have mined that to discover which email accounts they needed to use to break into their targets, according to people familiar with the matter.

Chinese hacking is starting to operate like a flywheel: hack target A, get information, use it to hack target B, get more information, then hit C.

The Biden administration provided some wise guidance to Microsoft:

Microsoft has pushed its customers to install security patches over the past month, releasing a blizzard of more than 25 patches that covered the wide array of Exchange versions. At the Biden administration task force’s urging, the company also simplified the updating process for customers, releasing a “one-click patch” option.

I can’t help but think that this level of sophistication would’ve eluded the Trump administration.

With China increasingly aggressive in numerous ways, this could be a big opportunity for American security companies to step up and provide better protection. I’ll definitely be on the look out for network security startups that look promising.

For more on technology, check out these posts:

If you found this post interesting, please share it on Twitter/LinkedIn/email using the buttons below. This helps more people find the blog! And please leave a comment at the bottom of the page letting me know what you think and what other information you’re interested in!

Check out the Stuff I Use page for some great deals on products and services I use to improve my health and productivity. They just might help you too! 

Photo: “Xi Jinping at the EP” by European Parliament is licensed under CC BY-NC-ND 2.0

Is China Using Its COVID Vaccines to Control Other Countries?

I just read a disturbing report from The Economic Times (essentially the Wall Street Journal of India). It says that China has offered its COVID vaccines to countries in Southeast Asia, but only if they support China in the WHO. There is a similar report from Nikkei Asia (basically the WSJ of Japan). Some Southeast Asian countries are buying vaccines from AstraZeneca and Pfizer instead.

With COVID deaths worldwide exceeding 10,000 per day, I find any attempt to play politics with these vaccines despicable. Anecdotally, I see increasing anger toward the Chinese government (which we must be careful to distinguish from the Chinese people). I recently happened upon a large vehicle protest by Falun Gong against the Chinese government at a rest stop in northern New Jersey.

What do you guys think of this information? Please leave a comment and let me know. I’m curious to hear others’ opinions.