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China’s government has just provided investors with another reminder of why they should tread carefully when putting money into the country.

At the end of last month, the Chinese ride-hailing app Didi made history when it floated on the New York Stock Exchange with a valuation of $70bn, making it the biggest IPO of a Chinese company in seven years.

Just days later, the Chinese government told Didi to stop registering new drivers and users for its app, which it followed by demanding that Didi be removed from Chinese app stores.

The app logo of Chinese ride-hailing giant Didi is seen reflected on its navigation map displayed on a mobile phone in this illustration picture taken July 1, 2021
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Didi was targeted days after floating in New York

The shares plunged and are now 42% lower than the price at which they listed.

Now Beijing has done it again with a fresh salvo aimed at tech and education companies.

Firstly, the Chinese government announced on Friday night that it was banning private tutoring and test preparation for core school subjects, arguing the move would ease financial pressure on hard-up Chinese families.

Private tutoring in China is a $120billion-a-year business and around three-quarters of Chinese children are reckoned to have some form of private tuition outside school.

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Beijing, which is concerned about the country’s rapidly-ageing population, suspects the financial pressure of educating children privately may be a reason why couples are still not having more children despite the abolition in 2015 of the “one child” policy.

The measure, which is believed to have come from President Xi Jinping himself, was accompanied by restrictions on foreign investment in private tutoring companies and is also expected to see advertising bans imposed – as well as restrictions on when tutoring can be made available.

Chinese President Xi Jinping has made a late decision to join the summit Pic: AP
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The clampdown on tutoring is believed to have come from President Xi Jinping himself. Pic: AP

The move sent shares of private tuition companies, many of which are listed in Hong Kong, tumbling.

New Oriental Education & Technology finished the session down 47%, while Scholar Education fell by 45% and Koolearn Technology by 33%.

Next came an attack on Tencent, one of China’s biggest tech companies, which on Saturday was ordered to give up the exclusive music licensing agreements it has signed with record companies – including Universal Music and Warner Music – around the world.

Tencent, which owns China’s most popular messaging service WeChat, is estimated to have an 80% share of the exclusive music streaming market in the country.

Shares of Tencent fell by almost 8% on the news.

Then, Beijing unveiled measures aimed at cooling what it sees as an overheated property market.

The People’s Bank of China (PBoC) is reported to have ordered lenders to raise mortgage rates for first time buyers from 4.65% to 5%.

At the same time, the PBoC is said to have ordered an increase in the interest rate for people buying second homes from 5.25% to 5.7%. That sent shares in property development companies lower.

View of a logo of online educator Koolearn Technology Holding Ltd, a subsidiary of New Oriental Education and Technology Group Inc., in Tangyin county, Anyang city, central China's Henan province, 6 April 2015. Pic: AP
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Private tuition is big business for companies such as Koolearn Pic: AP

Separately, China also today announced new rules aimed at better protecting delivery riders, following complaints that some are not being paid the minimum wage or are being sent on routes where it is impossible to complete the order in the time allowed.

That news sent shares of Meituan, one of China’s biggest food delivery companies, down by 14%.

Its shares have now halved in value since February.

Shares of the e-commerce giant Alibaba, which also operates a popular delivery service called Ele.me, fell by more than 6%.

Taken together, the various measures add up to an unappetising cocktail for investors, who reacted accordingly.

In Hong Kong, the Hang Seng slid by 4.13%, taking it to a level not seen since December last year.

In Shanghai, the blue-chip CSI300 index fell by 3.22%, again wiping out all gains for the year to date.

The broader Shanghai Composite, meanwhile, fell by 2.34% to a two-month low.

Didi Global share price chart 26/7/21
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Didi’s shares are now lower than the price at which they listed

There are two schools of thought as to what Beijing is doing here.

One is that this is just part of a wider campaign by the Chinese Communist Party to reassert its influence over life in China and strengthen its hand – with businesses and investors merely being caught up in this.

The other argues that this is a specific set of measures aimed at clipping the wings of businesses amid concerns that too many of them are not always operating within the law.

Aside from complaints about the treatment of workers in delivery firms, there is also a sense that the accounting practices of some property companies many not stand up to scrutiny, that the banks are being too lax with their lending standards and that the wealth being created by some of these companies, particularly those in the tech sector, are being too concentrated among a handful of plutocrats.

That theory is given credence by, for example, the way Beijing scuppered last year’s proposed stock market flotation of the payments company Ant Financial, which would have further added to the wealth of Jack Ma, the billionaire entrepreneur that created Ant and its former parent company, Alibaba.

Concerns about the quality of accounting at some companies have been rumbling ever since a former stock market darling, the coffee shop operator Luckin Coffee, collapsed last year after falsifying its accounts.

Either way, investors have been spooked, although some will have only themselves to blame given the way regulatory risk in China has been overlooked in recent years.

But it has certainly prompted investors in China to look more closely at their portfolios as they try to assess what other companies are at risk of seeing their business models reduced to rubble overnight by regulators.

Rightly so.

This Chinese government is very different from its immediate predecessors and is clearly far more relaxed about alienating foreign investors if it considers more important principles are at stake.

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Christmas rail strikes to go ahead as union rejects offer from operators

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RMT rejects offer from train operators aimed at preventing further strikes

The RMT has rejected an offer from train operators aimed at preventing strikes over the Christmas period, the union has announced.

The Rail Delivery Group (RDG) said its proposed framework would have supported pay increases of up to 8%, covering 2022 and 2023 pay awards, while delivering much-needed reforms.

But the RMT, led by secretary general Mick Lynch, has turned it down.

The union said: “The RDG is offering 4% in 2022 and 2023 which is conditional on RMT members accepting vast changes to working practices, huge job losses, Driver Only Operated (DOO) trains on all companies and the closure of all ticket offices.”

Mr Lynch added: “We have rejected this offer as it does not meet any of our criteria for securing a settlement on long term job security, a decent pay rise and protecting working conditions.

“The RDG and Department for Transport (DfT), who sets their mandate, both knew this offer would not be acceptable to RMT members.

“If this plan was implemented, it would not only mean the loss of thousands of jobs but the use of unsafe practices such as DOO and would leave our railways chronically understaffed.”

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RMT has demanded an urgent meeting with RDG on Monday morning in the hope of trying to resolve the dispute, the union posted on Twitter.

In a statement posted on the RMT website, Mr Lynch said the talks would aim to secure “a negotiated settlement on job security, working conditions and pay.”

It means rail strikes planned during December and early January are still scheduled to go ahead, with commuters facing severe disruption on 11, 12, 13, 14, 16, 17 December, and 3, 4, 6 and 7 January.

Mr Lynch previously insisted “I’m not the Grinch” as he defended the industrial action.

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All the lines affected by train strikes over Christmas and January

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How will strikes affect businesses?

The RDG said it was proposing a “fair and affordable offer in challenging times, providing a significant uplift in salary for staff” which would deliver “vital and long overdue” changes to working arrangements.

The draft framework agreement gives RMT the chance to call off its planned action and put the offer to its membership, a statement said.

“If approved by the RMT, implementation could be fast-tracked to ensure staff go into Christmas secure in the knowledge they will receive this enhanced pay award early in the New Year, alongside a guarantee of job security until April 2024,” an RDG spokesperson said.

“With revenue stuck at 20% below pre-pandemic levels and many working practices unchanged in decades, taxpayers who have contributed £1,800 per household to keep the railway running in recent years will balk at continuing to pump billions of pounds a year into an industry that desperately needs to move forward with long-overdue reforms and that alienates potential customers with sustained industrial action.”

The company called on the union to “move forward with us” so we can “give our people a pay rise and deliver an improved railway with a sustainable, long-term future for those who work on it.”

Transport Secretary Mark Harper described the situation as “incredibly disappointing and unfair to the public, passengers and rail workforce who want a deal”.

The deal will “help get trains running on time”, he said.

A bleak winter of strikes

Motorists have also been warned to brace for Christmas chaos after road workers revealed they will down tools for 12 days to coincide with rail walkouts.

National Highways workers, who operate and maintain roads in England, will take part in a series of staggered strikes from 16 December to 7 January, the PCS union said.

A growing list of unions are threatening to grind the country to a halt, putting pressure on Prime Minister Rishi Sunak.

He is attempting a more constructive, less combative approach with the unions as the government treads a careful line between “being tough but also being human – and treating people with respect”, a government source told Sky News.

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Military could ‘drive ambulances’ during strikes

Some 10,000 paramedics voted to strike in England and Wales, the GMB union announced this week.

They join up to 100,000 nurses set to walk out in the biggest-ever strike by the Royal College of Nursing (RCN) in England, Wales, and Northern Ireland on 15 and 20 December.

On Sunday morning, Conservative Party Chairman Nadhim Zahawi told Sky News’ Sophie Ridge on Sunday the army could be deployed to help ease possible strike disruption over Christmas.

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Morrisons owner paves way for departure of veteran CEO Potts

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Morrisons owner paves way for departure of veteran CEO Potts

The owners of Britain’s fourth-biggest supermarket chain are drawing up plans to identify a new chief executive a year after acquiring it in a £7bn deal.

Sky News has learnt that Morrisons‘ controlling shareholder, the US-based private equity firm Clayton Dubilier & Rice (CD&R), has retained Egon Zehnder International to strengthen the grocer’s executive ranks.

Retail industry sources said this weekend that Egon Zehnder had been approaching potential recruits “with one eye” on finding a successor to David Potts, who has run Morrisons since 2015.

Mr Potts is not expected to leave until at least 2024, and is focused on improving the Bradford-based company’s performance after it was recently displaced as Britain’s third-biggest supermarket chain by the German discounter Aldi.

A number of internal candidates are expected to vie for the opportunity of replacing Mr Potts, according to insiders.

One said that CD&R was “continuously” working on succession planning at Morrisons and its other portfolio companies.

Sir Terry Leahy, the former Tesco chief executive who has a long-standing relationship with CD&R, will play a key role in the succession planning process as Morrisons’ chairman.

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Earlier this year, Trevor Strain, Morrisons’ chief operating officer and previously its finance chief, left the company, having long been regarded as Mr Potts’ inevitable successor.

Morrisons delisted from the London Stock Exchange last year, ending a 54-year run as a publicly traded company.

Recent industry data showed that Morrisons had been usurped by Aldi in market share terms – a milestone in a sector which rarely demonstrates change in the membership of its top ranks.

Morrisons struck a deal earlier this year to rescue the convenience chain McColl’s, the market share of which was not included in that data.

CD&R and Morrisons declined to comment.

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OPEC oil cartel holds production steady in face of Russia sanctions uncertainty

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OPEC oil cartel holds production steady in face of Russia sanctions uncertainty

The Saudi-led OPEC oil cartel and allied producers including Russia have stuck to their output targets, despite uncertainty over the impact of fresh Western sanctions against Moscow.

The decision to maintain the status quo at a meeting of oil ministers on Sunday came ahead of the planned start of two measures aimed at hitting Russia‘s oil earnings following its invasion of Ukraine.

These are a boycott by the EU of most Russian oil, and a price cap of $60 (£49) on every barrel of its crude imposed by the G7 coalition of leading world economies.

Russia ‘significantly’ losing public support for invasion – live updates

OPEC+, which is made up of the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia, angered the US and other Western nations in October when it agreed to cut output by two million barrels per day, about 2% of world demand, from November until the end of 2023.

The move, which would lead to increased prices at a time of already soaring energy costs, led Washington to accuse the group of siding with Russia despite Moscow’s assault on Ukraine.

OPEC+ argued it had cut output because of a weaker economic outlook.

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Oil prices have declined since October due to slower Chinese and global growth and higher interest rates, prompting market speculation the group could cut output again.

However, the group of oil producers has now decided to keep the policy unchanged.

Its key ministers will next meet at the start of February for a monitoring committee, while a full meeting is scheduled for 3-4 June.

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The price cap was agreed on Friday by G7 nations and Australia to deprive Russia’s leader Vladimir Putin of revenue while keeping Russian oil flowing to global markets.

Moscow has said it would not sell its oil under the cap and was considering how to respond.

Many analysts and OPEC ministers have said the price cap is confusing and probably ineffective, as Moscow has been selling most of its oil to countries like China and India, which have refused to condemn the war in Ukraine.

The price cap was not discussed at Sunday’s OPEC+ meeting, according to sources.

Russia’s deputy prime minister Alexander Novak said his country would rather cut production than supply oil under the price cap, and pointed out the limit may affect other producers.

Several OPEC+ members are understood to have expressed frustration at the cap, saying the measure could ultimately be used by the West against any producer.

Washington has said the measure was not aimed at OPEC.

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