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Chinese Investments And COVID-19: What Future For Chinese Companies In The International Economy?

Over the last 10 years, China has become a major player in foreign direct investment (FDI). According to China’s Ministry of Commerce, by the end of 2019 over 27,500 Chinese companies had invested in 188 countries around the world, and 44,000 companies…

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chinese companies chinese telecom Greater Bay Area Top 10 richest people in China: One got $23B richer amid COVID-19

Over the last 10 years, China has become a major player in foreign direct investment (FDI). According to China’s Ministry of Commerce, by the end of 2019 over 27,500 Chinese companies had invested in 188 countries around the world, and 44,000 companies had been started abroad. Asia, Europe and Latin America are the main destinations for these investments. The coronavirus pandemic has severely curtailed global trade and reduced FDI flows. Amidst this unprecedented global health crisis, what does the future hold for Chinese companies in the international economy? Ni Gao (full bio) below explains the importance of FDI for China.

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The Main Motivations Behind FDI

The primary motivation for Chinese companies to invest in FDI is the pursuit of new resources and new markets.

The quest for resources, markets and efficiency are the main motivations behind FDI. Western companies generally have monopolistic or other specific advantages that enable them to maintain their competitiveness on the international market.

Companies in emerging countries such as China do not necessarily have these types of advantages when they want to grow internationally. They use international growth as a means of accessing resources that would otherwise be inaccessible. With building competencies as their long-term objective, mergers and acquisitions (M&A) is the preferred means of entry for Chinese companies, since it enables them to:

  • rapidly access the local market,
  • expand their international market share,
  • leverage a multitude of existing resources in the target company, such as their sales networks, patents, technologies or trademarks.

The pursuit of markets is another significant driver for Chinese companies. To better develop markets and meet consumer needs, Chinese companies have adopted a localised strategy, favouring local managers in countries with a different culture. In 2019, 60.5% of employees working for Chinese companies abroad were non-Chinese. This adaptation strategy is part of their success story.

Difficulties And Challenges Related To The Global Health Crisis

The model of the Chinese economy and its manufacturing industry are heavily export-based. The pandemic has disrupted global production chains and curtailed trade in goods and the movement of people. Affected by the slow global economic recovery, FDI is highly volatile and uncertainty has only intensified. This makes it all the more difficult for Chinese companies to operate in an unstable situation that has had negative impacts on the economies of host countries. Current conditions and the global economic environment are not conducive to the internationalisation of Chinese start-ups.

In the United States, Chinese FDI plummeted due to trade tensions. The pandemic has also affected investment flows between the world’s two largest economies. Government policies have had a strong impact on Chinese FDI. Most Chinese companies have reconsidered their investment plans, especially in the United States.

Several weeks ago, the US president announced a US ban on the application TikTok in the name of national security. To confront this change and continue to operate in the market, TikTok was forced to partner with two American companies (Oracle and Walmart). The matter is still pending, and the Committee on Foreign Investment can block the transaction at any time for reasons of national security.

Political hurdles have become a recurring and very common theme on their path to internationalisation in some host countries.

The Future For Chinese Companies: How To Confront Instability And Win Over New Markets?

Although COVID-19 has significantly impacted the entire global economy, it will not be the death knell of globalisation, for three reasons:

  • Trade between countries and peoples, even if currently slowed down, will continue in one way or another,
  • Increased digital connectivity facilitates the flow of ideas between companies,
  • FDI will enjoy a new image.

For Chinese companies, building their technological competencies and international experience are key factors in tackling the instability and challenges posed by their growth. At the same time, a better understanding of host countries’ regulations and legislation may help them to expand their international operations.

At present, Chinese companies still play – and will continue to play – a major role in the global economy. This will require them to consider corporate social responsibility. A CSR approach can enable Chinese companies to achieve stronger governance, a better image and longer-term growth. With the health crisis, markets are demanding more communication and transparency from companies. For Chinese companies, building trust in order to win over new international markets will necessarily involve greater communication and transparency.


About Ni Gao:

Ni Gao, Assistant Professor in the Management Department at KEDGE Business School, holds a PhD in Management Sciences. Her research focuses on analysing emerging-country investment in Europe, primarily on internationalisation strategies, international management, and control of foreign subsidiaries.

About KEDGE Business School:

KEDGE Business School is a benchmark French business school with 4 campuses in France (Paris, Bordeaux, Marseille and Toulon), 3 overseas (2 in China, in Shanghai and Suzhou, and 1 in Africa in Dakar) and 3 partner campuses (Avignon, Bastia and Bayonne). The KEDGE community is made up of 14,800 students (23% of whom are international students), 192 full-time lecturers (45% of whom are international), 201 international academic partners and 70,000 graduates worldwide. KEDGE offers a portfolio of 36 training programmes in management and design for students and industry professionals. It also provides customised educational programmes for businesses at national and international levels. KEDGE Business School is AACSB, EQUIS and AMBA-accredited, and is a member of the Conférence des Grandes Ecoles. It is also recognised by the French government, with officially approved programmes, and is EESPIG-certified. KEDGE is ranked 34th by the Financial Times in the European Business School rankings and 41st globally for its Executive MBA.

kedge.edu - @kedgebs - LinkedIn/Kedge

The post Chinese Investments And COVID-19: What Future For Chinese Companies In The International Economy? appeared first on ValueWalk.

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AI vs. elections: 4 essential reads about the threat of high-tech deception in politics

Using disinformation to sway elections is nothing new. Powerful new AI tools, however, threaten to give the deceptions unprecedented reach.

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Like it or not, AI is already playing a role in the 2024 presidential election. kirstypargeter/iStock via Getty Images

It’s official. Joe Biden and Donald Trump have secured the necessary delegates to be their parties’ nominees for president in the 2024 election. Barring unforeseen events, the two will be formally nominated at the party conventions this summer and face off at the ballot box on Nov. 5.

It’s a safe bet that, as in recent elections, this one will play out largely online and feature a potent blend of news and disinformation delivered over social media. New this year are powerful generative artificial intelligence tools such as ChatGPT and Sora that make it easier to “flood the zone” with propaganda and disinformation and produce convincing deepfakes: words coming from the mouths of politicians that they did not actually say and events replaying before our eyes that did not actually happen.

The result is an increased likelihood of voters being deceived and, perhaps as worrisome, a growing sense that you can’t trust anything you see online. Trump is already taking advantage of the so-called liar’s dividend, the opportunity to discount your actual words and deeds as deepfakes. Trump implied on his Truth Social platform on March 12, 2024, that real videos of him shown by Democratic House members were produced or altered using artificial intelligence.

The Conversation has been covering the latest developments in artificial intelligence that have the potential to undermine democracy. The following is a roundup of some of those articles from our archive.

1. Fake events

The ability to use AI to make convincing fakes is particularly troublesome for producing false evidence of events that never happened. Rochester Institute of Technology computer security researcher Christopher Schwartz has dubbed these situation deepfakes.

“The basic idea and technology of a situation deepfake are the same as with any other deepfake, but with a bolder ambition: to manipulate a real event or invent one from thin air,” he wrote.

Situation deepfakes could be used to boost or undermine a candidate or suppress voter turnout. If you encounter reports on social media of events that are surprising or extraordinary, try to learn more about them from reliable sources, such as fact-checked news reports, peer-reviewed academic articles or interviews with credentialed experts, Schwartz said. Also, recognize that deepfakes can take advantage of what you are inclined to believe.


Read more: Events that never happened could influence the 2024 presidential election – a cybersecurity researcher explains situation deepfakes


How AI puts disinformation on steroids.

2. Russia, China and Iran take aim

From the question of what AI-generated disinformation can do follows the question of who has been wielding it. Today’s AI tools put the capacity to produce disinformation in reach for most people, but of particular concern are nations that are adversaries of the United States and other democracies. In particular, Russia, China and Iran have extensive experience with disinformation campaigns and technology.

“There’s a lot more to running a disinformation campaign than generating content,” wrote security expert and Harvard Kennedy School lecturer Bruce Schneier. “The hard part is distribution. A propagandist needs a series of fake accounts on which to post, and others to boost it into the mainstream where it can go viral.”

Russia and China have a history of testing disinformation campaigns on smaller countries, according to Schneier. “Countering new disinformation campaigns requires being able to recognize them, and recognizing them requires looking for and cataloging them now,” he wrote.


Read more: AI disinformation is a threat to elections − learning to spot Russian, Chinese and Iranian meddling in other countries can help the US prepare for 2024


3. Healthy skepticism

But it doesn’t require the resources of shadowy intelligence services in powerful nations to make headlines, as the New Hampshire fake Biden robocall produced and disseminated by two individuals and aimed at dissuading some voters illustrates. That episode prompted the Federal Communications Commission to ban robocalls that use voices generated by artificial intelligence.

AI-powered disinformation campaigns are difficult to counter because they can be delivered over different channels, including robocalls, social media, email, text message and websites, which complicates the digital forensics of tracking down the sources of the disinformation, wrote Joan Donovan, a media and disinformation scholar at Boston University.

“In many ways, AI-enhanced disinformation such as the New Hampshire robocall poses the same problems as every other form of disinformation,” Donovan wrote. “People who use AI to disrupt elections are likely to do what they can to hide their tracks, which is why it’s necessary for the public to remain skeptical about claims that do not come from verified sources, such as local TV news or social media accounts of reputable news organizations.”


Read more: FCC bans robocalls using deepfake voice clones − but AI-generated disinformation still looms over elections


How to spot AI-generated images.

4. A new kind of political machine

AI-powered disinformation campaigns are also difficult to counter because they can include bots – automated social media accounts that pose as real people – and can include online interactions tailored to individuals, potentially over the course of an election and potentially with millions of people.

Harvard political scientist Archon Fung and legal scholar Lawrence Lessig described these capabilities and laid out a hypothetical scenario of national political campaigns wielding these powerful tools.

Attempts to block these machines could run afoul of the free speech protections of the First Amendment, according to Fung and Lessig. “One constitutionally safer, if smaller, step, already adopted in part by European internet regulators and in California, is to prohibit bots from passing themselves off as people,” they wrote. “For example, regulation might require that campaign messages come with disclaimers when the content they contain is generated by machines rather than humans.”


Read more: How AI could take over elections – and undermine democracy


This story is a roundup of articles from The Conversation’s archives.


This article is part of Disinformation 2024: a series examining the science, technology and politics of deception in elections.

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Disinformation is rampant on social media – a social psychologist explains the tactics used against you

Misinformation, disinformation and hoaxes: What’s the difference?

Disinformation campaigns are murky blends of truth, lies and sincere beliefs – lessons from the pandemic


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Free school meals for all may reduce childhood obesity, while easing financial and logistical burdens for families and schools

Since nutrition standards were strengthened in 2010, eating at school provides many students better diet quality compared with other major U.S. food s…

School meal waivers that started with the COVID-19 pandemic stopped with the end of the public health emergency. Jonathan Wiggs/The Boston Globe via Getty Images

School meals are critical to child health. Research has shown that school meals can be more nutritious than meals from other sources, such as meals brought from home.

A recent study that one of us conducted found the quality of school meals has steadily improved, especially since the 2010 Healthy, Hunger-Free Kids Act strengthened nutrition standards for school meals. In fact, by 2017, another study found that school meals provided the best diet quality of any major U.S. food source.

Many American families became familiar with universal free school meals during the COVID-19 pandemic. To ease the financial and logistical burdens of the pandemic on families and schools, the U.S. Department of Agriculture issued waivers that allowed schools nationwide to provide free breakfast and lunch to all students. However, these waivers expired by the 2022-23 school year.

Since that time, there has been a substantial increase in schools participating in the Community Eligibility Provision, a federal policy that allows schools in high poverty areas to provide free breakfast and lunch to all attending students. The policy became available as an option for low-income schools nationwide in 2014 and was part of the Healthy, Hunger-Free Kids Act. By the 2022-23 school year, over 40,000 schools had adopted the Community Eligibility Provision, an increase of more than 20% over the prior year.

Many families felt stressed when a federal program providing free school meals during the pandemic came to an end.

We are public health researchers who study the health effects of nutrition-related policies, particularly those that alleviate poverty. Our newly published research found that the Community Eligibility Provision was associated with a net reduction in the prevalence of childhood obesity.

Improving the health of American children

President Harry Truman established the National School Lunch Program in 1946, with the stated goal of protecting the health and well-being of American children. The program established permanent federal funding for school lunches, and participating schools were required to provide free or reduced-price lunches to children from qualifying households. Eligibility is determined by income based on federal poverty levels, both of which are revised annually.

In 1966, the Child Nutrition Act piloted the School Breakfast Program, which provides free, reduced-price and full-price breakfasts to students. This program was later made permanent through an amendment in 1975.

The Community Eligibility Provision was piloted in several states beginning in 2011 and became an option for eligible schools nationwide beginning in 2014. It operates through the national school lunch and school breakfast programs and expands on these programs.

Gloved hand placing cheese slices on bun slices
Various federal and state programs have sought to make food more accessible to children. John Moore/Getty Images

The policy allows all students in a school to receive free breakfast and lunch, rather than determine eligibility by individual households. Entire schools or school districts are eligible for free lunches if at least 40% of their students are directly certified to receive free meals, meaning their household participated in a means-based safety net program, such as the Supplemental Nutrition Assistance Program, or the child is identified as runaway, homeless, in foster care or enrolled in Head Start. Some states also use Medicaid for direct certification.

The Community Eligibility Provision increases school meal participation by reducing the stigma associated with receiving free meals, eliminating the need to complete and process applications and extending access to students in households with incomes above the eligibility threshold for free meals. As of 2023, the eligibility threshold for free meals is 130% of the federal poverty level, which amounts to US$39,000 for a family of four.

Universal free meals and obesity

We analyzed whether providing universal free meals at school through the Community Eligibility Provision was associated with lower childhood obesity before the COVID-19 pandemic.

To do this, we measured changes in obesity prevalence from 2013 to 2019 among 3,531 low-income California schools. We used over 3.5 million body mass index measurements of students in fifth, seventh and ninth grade that were taken annually and aggregated at the school level. To ensure rigorous results, we accounted for differences between schools that adopted the policy and eligible schools that did not. We also followed the same schools over time, comparing obesity prevalence before and after the policy.

Child scooping food from salad bar onto a tray; other children lean against the wall
Free school meals may help reduce health disparities among marginalized and low-income children. Whitney Hayward/Portland Portland Press Herald via Getty Images

We found that schools participating in the Community Eligibility Provision had a 2.4% relative reduction in obesity prevalence compared with eligible schools that did not participate in the provision. Although our findings are modest, even small improvements in obesity levels are notable because effective strategies to reduce obesity at a population level remain elusive. Additionally, because obesity disproportionately affects racially and ethnically marginalized and low-income children, this policy could contribute to reducing health disparities.

The Community Eligibility Provision likely reduces obesity prevalence by substituting up to half of a child’s weekly diet with healthier options and simultaneously freeing up more disposable income for low-to-middle-income families. Families receiving free breakfast and lunch save approximately $4.70 per day per child, or $850 per year. For low-income families, particularly those with multiple school-age children, this could result in meaningful savings that families can use for other health-promoting goods or services.

Expanding access to school meals

Childhood obesity has been increasing over the past several decades. Obesity often continues into adulthood and is linked to a range of chronic health conditions and premature death.

Growing research is showing the benefits of universal free school meals for the health and well-being of children. Along with our study of California schools, other researchers have found an association between universal free school meals and reduced obesity in Chile, South Korea and England, as well as among New York City schools and school districts in New York state.

Studies have also linked the Community Eligibility Provision to improvements in academic performance and reductions in suspensions.

While our research observed a reduction in the prevalence of obesity among schools participating in the Community Eligibility Provision relative to schools that did not, obesity increased over time in both groups, with a greater increase among nonparticipating schools.

Universal free meals policies may slow the rise in childhood obesity rates, but they alone will not be sufficient to reverse these trends. Alongside universal free meals, identifying other population-level strategies to reduce obesity among children is necessary to address this public health issue.

As of 2023, several states have implemented their own universal free school meals policies. States such as California, Maine, Colorado, Minnesota and New Mexico have pledged to cover the difference between school meal expenditures and federal reimbursements. As more states adopt their own universal free meals policies, understanding their effects on child health and well-being, as well as barriers and supports to successfully implementing these programs, will be critical.

Jessica Jones-Smith receives funding from the National Institutes of Health.

Anna Localio does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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International

TikTok Ban Obscures Chinese Stock Gold Rush

No one wants to invest in China right now. The country’s stock market is teetering on the brink of collapse. And it is about to lose its biggest foothold…

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No one wants to invest in China right now.

The country’s stock market is teetering on the brink of collapse.

And it is about to lose its biggest foothold in America — TikTok.

Yet, beneath its crumbling economy, military weather balloons and blatant propaganda tools lie some epic opportunities…

…if you have the stomach and the knowledge.

Because as Jim Woods wrote in his newsletter last month:

“China has been so battered for so long, that there is a lot of deep value here for the ‘blood in the ‘’red’’ streets’ investors.”

And boy was he right.

However, this battle-tested veteran didn’t recommend buying individual Chinese stocks.

He was more interested in the exchange-traded funds (ETFs) like the CHIQ.

And here’s why…

Predictable Manipulation

China’s heavy-handed approach creates gaping economic inefficiencies.

When markets falter, President Xi calls on his “national team” to prop up prices.

$17 billion flowed into index-tracking funds in January as the Hang Sang fell over 13% while the CSI dropped over 7%.

Jim Woods saw this coming from a mile away.

In late February, he highlighted the Chinese ETF CHIQ in late February, which has rallied rather nicely since then.

This ETF focuses on the Chinese consumer, a recent passion project for the central government.

You see, around 2018, when President Xi decided to smother his own economy, notable shifts were already taking place.

The once burgeoning retail market had slowed markedly. Developers left cities abandoned, including weird copies of Paris (Tianducheng) and England.

Source: Shutterstock

So, Xi and co. shifted the focus to the consumer… which went terribly.

For starters, a lot of the consumer wealth was tied up in real estate.

Then you had a growing population of unemployed younger adults who didn’t have any money to spend.

Once the pandemic hit, everything collapsed.

That’s why it took China far longer to recover even a sliver of its former economy.

While it’s not the growth engine of the early 2000s, the old girl still has some life left in it.

As Jim pointed out, China’s consumer spending rebounded nicely in Q4 2023.

Source: National Bureau of Statistics of China

Combined with looser central bank policy, it was only a matter of time before Chinese stocks caught a lift.

The resurgence may be largely tied to China’s desire to travel. After all, its people have been cooped up longer than any other country.

But make no mistake, this doesn’t make China a long-term investment.

Beyond what most people understand about China’s politics, there’s a little-known fact about how they treat foreign investors.

Money in. Nothing out.

When we buy a stock, we’re taking partial ownership in that company. This entitles us to a portion of the profits (or assets).

That doesn’t happen with Chinese companies.

American depository receipts (ADRs) aren’t actual shares of a company. It’s a note that the intermediary ties to shares of the company they own overseas.

So, we can only own Chinese companies indirectly.

But there’s another key feature you probably weren’t aware of.

Many of the Chinese companies we, as Americans invest in, don’t pay dividends. In fact, a much smaller percentage of Chinese companies pay any dividends.

Alibaba is a perfect example.

Despite generating billions of dollars in cash every year, it doesn’t pay dividends.

What do its managers do with the money?

Other than squirreling away $80 billion on its balance sheets, they do share buybacks.

Plenty of investors will tell you that’s even better than dividends.

But you have no legal ownership rights in China. So, what is that ADR in reality?

We’d argue nothing but paper profits at best, and air at worst.

That’s why it’s flat-out dangerous to own shares of individual Chinese companies long-term.

Any one of them can be nationalized at any moment.

Chinese ETFs reduce that risk through diversification, similar to junk bond funds.

Short of an all-out ban, like between the United States and Russia, the majority of the ETF holdings should remain intact.

Opportunistic Investing

If China is so unstable, and capable of changing at a moment’s notice, how can investors uncover pockets of value?

As Jim showed with his ETF selection, you can have some sector or thematic idea so long as you have the data to support it.

China, like any large institution, isn’t going to change its broad economic policies overnight.

As long as you study the general movements of the government, you can steer clear of the catastrophic zones and towards the diamond caves.

Because when things look THIS bad, you know the opportunities are even juicier.

But rather than try to run this maze solo, take this opportunity to check out Jim Woods’ latest report on China.

In it, he details the broad economic themes driving the Chinese government, and how to exploit them for gain.

Click here to explore Jim Woods’ report.

The post TikTok Ban Obscures Chinese Stock Gold Rush appeared first on Stock Investor.

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