Business
Chinese private enterprise; communist party seeks greater control
At a summit with China’s richest entrepreneurs in late 2018 Xi Jinping sought to allay concerns that the state had declared war on the country’s private sector. Although officials in Beijing had spent the previous year bringing to heel unruly tycoons, China’s president insisted that rumours of a forceful push for party influence in the private sector were untrue. He exhorted the business leaders to “take a pill of reassurance”.
The medicine has been hard to swallow. Since then the Communist Party has sought a more active hand in recruitment and business decisions. And after subduing a band of headstrong bosses at overextended financial conglomerates, the state is now taking aim at China’s tech billionaires, making it clear that outspoken critics will not be tolerated.
Mr Xi’s preoccupation has always been maintaining China’s social and financial stability. Keeping big business in check is part of that plan. It should come as no surprise that the state is now homing in on tech, which has expanded rapidly. Six of China’s 20 most valuable listed companies are tech firms and with billions of users they touch the lives and wallets of almost all citizens.
A reckoning for the sector began with what looked like a shot across the bows of China’s largest financial-technology group. The suspension by regulators on November 5th of Ant Financial’s $37bn initial public offering with less than 48 hours’ notice was at first interpreted merely as a warning to its founder, Jack Ma, who had previously criticised China’s state-owned banks. But on November 10th the publication of an extensive draft of new rules for technology groups laid bare the state’s ambitions to bring to heel not just Ant, but the whole of China’s tech industry.
Mr Xi’s relationship with China’s tycoons has always been troubled. When he became president in 2013, he inherited a corporate system replete with fraud, patchy regulation and surging debt. After the success of an anti-corruption campaign that mostly targeted officials, Mr Xi took aim at a group of businessmen who were ploughing huge sums into risky overseas investments. Purchases included SeaWorld, an American amusement-park group, and the Waldorf Astoria, a swish hotel in New York. Officials argued that many of these acquisitions were thinly disguised means to divert capital out of China.
Many of the businessmen who once fancied themselves as a Chinese Warren Buffett are in prison or worse. Wu Xiaohui, the chairman of Anbang, which bought the Waldorf among other assets, was handed an 18-year prison sentence in 2018 for financial crimes. Ye Jianming, who attempted to buy a $9bn stake in Rosneft, a Russian oil producer, was detained in early 2018. His whereabouts is still unknown. Xiao Jianhua, a broker for China’s political elite who once controlled Baoshang Bank, was kidnapped by Chinese agents from his flat at the Four Seasons Hotel in Hong Kong in 2017 and is thought to be co-operating with authorities in the unwinding of his financial conglomerate.
The crackdown has put an abrupt end to a boom in global spending by Chinese firms: in 2016 there were $200bn-worth of overseas mergers and acquisitions, the figure in 2019 was less than a fifth of that. And under government pressure private groups have divested assets worth billions of dollars. hna, an airlines and logistics group that bought a large stake in Deutsche Bank and Hilton Worldwide, a hotel group, has sold assets worth over $20bn in recent years. Anbang Insurance was nationalised, putting the Waldorf under the ownership of China’s Ministry of Finance. Baoshang was taken over by the state and allowed to file for bankruptcy in August. Acquisitions of European football clubs by Chinese groups have all but ended.
Analysts have praised the way in which systemic risks posed by companies such as Anbang and hna appear to have been reduced on Mr Xi’s watch. Within China few dare to criticise him for his failings. Those who have done so have been dealt with severely. Ren Zhiqiang, a senior member of the Communist Party who once ran a state-owned property firm, penned a missive to friends earlier this year in which he referred to Mr Xi as a “naked clown”. He was sentenced to 18 years in prison in September for bribery and embezzlement.
The party has also been increasing its influence over private firms in more subtle ways. Under a strategy referred to as “party building”, firms have been asked to launch party committees, which can opine on whether a corporate decision is in line with government policy. The number of committees in publicly traded but privately controlled companies is still low. According to a survey of 1,378 Chinese listed firms by Plenum, a consultancy, of the 61% that were privately controlled only 11.5% had party-building clauses in their charters compared with 90% of state-owned firms.
Party invitation
Yet the prevalence of such committees looks likely to grow. In September Mr Xi asked for the private sector to “unite around the party”. A day later Ye Qing, vice-chairman of the All-China Federation of Industry and Commerce, a powerful organisation controlled by the Communist Party, issued a more detailed list of demands. He called for private groups to establish human-resources departments led by the party and monitoring units that would allow the party to audit company managers.
This might not affect all firms equally. “For big companies, there’s no negotiation. The party approaches you and you say yes,” says Joe Zhang, a business consultant who has sat on the boards of Chinese private and state corporations. However, he also argues that for most smaller firms, less visible and not as economically important, party cells are little more than a rubber stamp as profits will trump state influence on decision-making. Their influence may not necessarily be unwelcome either. One executive, whose company has a party committee, argues that by growing closer to the thinking of the party leadership, “we can steer the company accordingly”. This heads off potential clashes with the state.
So far there is little evidence to suggest that party committees have hurt profitability, says Huang Tianlei of the Peterson Institute for International Economics, a think-tank. But increased party influence could inhibit some operations. “Innovation may be suppressed. More red tape can emerge. A firm can turn from profit-driven to goal-driven, sacrificing profitability,” says Mr Huang.
It is possible that party committees may soon play a larger role in tech firms. A raft of new regulations presents a more immediate threat. Ant is connected to hundreds of millions of people through its payments and lending platforms. Like other Chinese tech giants it holds precious data on customers as well as controlling a pipeline through which hundreds of billions of dollars are lent and spent. That such power lies in private hands is a source of tension between the party and entrepreneurs.
“These resources need to be tightly controlled and the political loyalty of the firms and entrepreneurs, not only to the regime but also to individual political leaders, needs to be strictly maintained,” says Sun Xin, an academic at King’s College London. “The case of Ant is just one manifestation of this underlying logic.”
The halting of Ant’s ipo was triggered by new draft regulations aimed at online micro lending. For Ant, the rules can only be interpreted as an attack on the firm’s lending platform, its biggest source of revenue. Mr Ma may regret comparing China’s banks to pawnshops in a speech in October. The comments infuriated senior officials and played a part in the hasty suspension of Ant’s ipo. But Mr Ma is not to blame for the latest onslaught of antitrust rules, although he may have sped up their arrival.
vie-ing for influence
The new rules, under consideration for some while, will for the first time explicitly apply monopoly controls on internet and e-commerce firms. For many years China’s antitrust laws have not exempted the groups but they have also not been targeted in monopoly cases. This has allowed a few companies to control large swathes of the digital economy. They also take aim at the structures that have allowed Chinese tech firms to raise capital overseas. Barred from allowing foreign investors to take direct stakes, for two decades virtually all capital-hungry tech groups have skirted the rules by using a “variable-interest entity” (vie) to link foreign cash to the Chinese market. The structure creates an offshore holding company into which foreigners invest. That company has a contractual agreement with an onshore firm to receive the economic benefits of the underlying assets.
The vie structure has long been tolerated by Chinese authorities, but without full legal recognition. Foreigners have virtually no recourse in China to claim rights to the assets they have invested in. Foreign funds have long been wary of the framework but most Chinese tech companies still use it to structure their overseas listings. The new antitrust rules could require companies to seek approval for such arrangements, calling into question whether vies will be permitted in the future and so the way that foreign capital will reach Chinese tech firms. The threat of withdrawing tacit approval for a vie is another way the state can intimidate firms and their owners.
Perhaps the new rules will humble the outspoken Mr Ma. He has not spoken publicly on the matter, but Ant has bent the knee and agreed to embrace the new regulations. Mr Xi has made clear that no company is too big, and no ipo too valuable, to be allowed to challenge the state. (Economist)
By Ifham Nizam
In a significant move for Sri Lanka’s educational landscape, the Australian High Commissioner to Sri Lanka, Paul Stephens, officially launched Curtin University Colombo, marking a milestone in the growing partnership between Australia and Sri Lanka in higher education.
The event was held on Monday at the Curtin University in Colombo, with dignitaries, educators, and students in attendance.
Curtin University Colombo, an extension of Curtin University’s global network, now becomes the fifth world-campus for the Australian institution, further strengthening the ties between the two nations, the Australian High Commissioner said.
The launch represents the culmination of years of collaboration and shared vision between Curtin University and the Sri Lankan Institute of Information Technology (SLIIT). This partnership, which began in 2001, has produced over 3,000 graduates and is seen as a crucial step in the further development of Sri Lanka’s educational infrastructure.
The Australian High Commissioner stressed the importance of the Curtin University Colombo campus as a testament to Australia’s ongoing commitment to Sri Lanka’s education sector.
He said that more than 30 Australian educational institutions currently operate in Sri Lanka, with Australia being the leading destination for Sri Lankan students. Some 18,000 Sri Lankan students are currently studying in Australia, a number expected to rise in the coming years.
Stephens added: “Curtin University Colombo’s establishment represents our belief in Sri Lanka’s future.
“Despite the challenges Sri Lanka has faced in recent years, the optimism surrounding this project reflects a shared vision for a peaceful, prosperous, and united future.
“There is strong support from the Sri Lankan government for the country’s education sector, particularly in enhancing employability and access to quality education. This initiative aligns with Sri Lanka’s goals for long-term sustainable growth, especially in sectors like engineering, business, and IT—areas in which Curtin University has established a global reputation for producing industry-ready graduates.
“The partnership between Curtin University and SLIIT was further solidified in 2020 with the establishment of a Curtin Colombo campus, offering fully-franchised undergraduate programs in engineering and business. With the new Curtin University Colombo campus, students will now have access to a world-class education right in their home country, with the added benefit of an internationally recognized Australian qualification.”
Stephens praised the collaborative efforts that led to this achievement, acknowledging the hard work and commitment of all involved in the creation of Curtin University Colombo.
He also encouraged students and prospective students to seize the opportunity to study at the new campus, which is poised to play a key role in Sri Lanka’s educational and economic development.
“By equipping the next generation with the necessary skills, we can help Sri Lanka achieve its goal of becoming a more agile, export-oriented economy,” said Stephens. “The graduates of Curtin University Colombo will possess the skills necessary to navigate the challenges of a rapidly changing global market.”
Curtin University, ranked among the top universities globally, has been recognized for its research, strong industry partnerships, and focus on producing graduates who are well-prepared for the workforce. With more than 50,000 students and partnerships with over 80 institutions worldwide, Curtin’s global network continues to grow.
In an engaging speech that chronicled the remarkable evolution of the Sri Lanka Institute of Information Technology (SLIIT), Professor Lalith Gamage, chairman of Curtin Colombo and Vice Chancellor and CEO of SLIIT, reflected on the institution’s growth from its humble beginnings in 1999 to becoming one of the top-ranking universities in Sri Lanka today.
The story began in the late 1990s when Sri Lanka’s burgeoning IT industry faced a significant shortage of skilled professionals. In response to this challenge, Professor Gamage, alongside a group of visionary educators, founded SLIIT with the aim of bridging this gap. At the time, the University of Moratuwa’s Computer Science Department could only accommodate a small number of students, enrolling just 16, later increasing to 25. However, he said the demand from the IT industry was far greater – calling for thousands of trained professionals to drive the sector’s growth.
He said that recognizing the need to create an educational institution that could cater to this demand, SLIIT was established as an independent entity, separate from the University of Moratuwa, without degree-awarding status. The response from prospective students was overwhelming, with over 3,150 applications flooding in for a diploma in Information Technology. Despite initially planning to enroll only 150 students, the institution expanded its capacity to accommodate 400.
By 2000, the institution’s ambitions grew. Professor Gamage sought international partnerships to offer degree programs, reaching out to his friend, a professor at Curtin University in Australia. What started as a hopeful collaboration eventually led to a franchising agreement between Curtin University and SLIIT, allowing the latter to offer degrees and expand its offerings in IT. This partnership not only bolstered SLIIT’s academic credentials but also contributed significantly to the rapid growth of Sri Lanka’s IT industry, which saw annual growth of 25% and became the fifth-largest export sector in the country.
The partnership with Curtin University became a cornerstone of SLIIT’s development, bringing world-class curricula and faculty to Sri Lanka. Curtin University staff helped improve SLIIT’s academic programs, and SLIIT faculty were given the opportunity to study at Curtin, bringing back invaluable knowledge and experience to enhance the institution’s teaching standards. Over time, more than 15 staff members completed their PhDs through this collaboration, further strengthening SLIIT’s position in the higher education landscape.
Professor Gamage is confident in generating an economic contribution of USD 1 billion to Sri Lanka’s economy within the next three years, positioning the country as a leader in higher education in the region. The long-term goal is to build upon the momentum of the IT industry’s growth, which began in the early 2000s, and expand the impact of higher education on Sri Lanka’s economy.
National Savings Bank showcased robust financial performance in the third quarter of 2024, propelled by the short-term advantages of liability repricing and a surge in fee-based income.
The nation’s premier savings bank reported a remarkable net interest income of Rs. 53.4 billion for the nine months ending 30th September 2024, reflecting a remarkable growth of 191% compared with Rs. 18.3 billion recorded during the same period last year. This outstanding achievement was realized despite a decline in both gross income and interest income of 8.7% and 9.1% respectively over the period under review. The decline in interest income was primarily attributed to the sustained reduction in interest rates on government securities as well as loans and advances when compared to the corresponding period of the previous year.
“The past nine months have presented significant challenges, as we have strived to maintain margins while growing our portfolios in an interest rate reducing scenario. Although we are witnessing signs of recovery, the lingering effects of the worst economic crisis continue to impact both our borrowers and depositors. Despite these obstacles, our resilience and strategic focus have allowed us to navigate these turbulent times, ensuring that the Bank remains on a path to sustained growth and stability” NSB Chairman Dr Harsha Cabral PC commented.
Fee and commission income surged by 44%, primarily driven by higher revenue from card operations, mobile app transactions, and internet banking activities compared to that of 3Q2023. Meanwhile, the net gain on derecognition of financial assets measured at fair value through other comprehensive income soared by an impressive growth, bolstered by realized gains from treasury bonds and treasury bills totalling Rs. 442 million. Operating expenses rose by 28%, largely attributed to increased personal and other operating expenses.
Business
Energy Efficiency Testing Laboratory, funded and established by the Republic of Korea, officially inaugurated in Ja-Ela
The Energy Efficiency Testing Laboratory, funded and established by the Republic of Korea, was officially inaugurated in Ja-Ela on November 28. The Korea-donated facility is poised to transform energy efficiency testing and certification in Sri Lanka, bringing substantial benefits to the nation’s industries, producers, and consumers.
Miyon Lee, the Korean Ambassador to Sri Lanka, attended the event and delivered a congratulatory address. Emphasizing the lab’s importance, Ambassador Lee underscored the scale of the 5-year, $13.8 billion project and its potential to improve the efficiency of air conditioning appliances, which account for a significant portion of global electricity consumption. She pointed out that the air conditioning is one of the largest contributors to electricity consumption globally, accounting for over 70% of usage. “Enhancing the energy efficiency of air conditioners is therefore critical to managing Sri Lanka’s overall energy consumption,” she added.
The establishment of the laboratory reflects a collaborative effort involving Korea’s key energy-focused institutions: the Korea Energy Agency (KEA), Korea Research Institute on Climate Change (KRICC), and Korea Testing Certification Institute (KTCI). These organizations played a critical role in designing, constructing, and equipping the facility with advanced technology. In addition to the construction of the laboratory, the Korean government has reinforced its commitment by offering policy consultation and technical assistance to Sri Lanka’s energy sector. This multifaceted approach highlights Korea’s dedication to helping Sri Lanka address energy challenges and transition toward a more sustainable future.
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