A man rides a bike in front of a tree and Evergrande’s logo
Photo: Jade Gao/AFP via Getty Images

Crypto’s weird Evergrande freakout

Protocol China

Good morning, and happy belated Mid-Autumn Festival. Teetering real estate firm Evergrande dominated this week's China headlines, seemingly threatening a global asset contagion that's somehow hit the bottom lines of just about everyone, from Stateside retail investors with 401(k)s in index funds to cryptocurrency speculators with no direct exposure to the People's Republic. To adapt a famous phrase on politics: You might not take an interest in China, but China's economy will somehow take an interest in you.

In this week's Protocol | China: what the Evergrande debacle means, China's metaverse as the next big export, and the fall of China's (other) Great Firewall.

The Big Story

Crypto's weird Evergrande freak-out

Evergrande's likely failure is on everybody's lips right now, including those of crypto investors who just experienced a huge, Evergrande-driven sell-off. The good news: Evergrande will probably not blow up the Chinese economy, if only because Beijing won't let it happen. Prepare instead for what the Financial Times' editorial board calls "a controlled explosion."

  • Still, President Xi Jinping — who famously said in 2017 that houses are "for living in" — is unlikely to loosen the regulatory reins any time soon. His corporate crackdowns have become key to his "re-election" pitch, The Wall Street Journal's Lingling Wei reported Monday.
  • Xi's right about one thing: Chinese property is indeed messed up. About three-quarters of all Chinese household wealth is tied up in the sector, crowding out investment in equities. By any reasonable measure, properties are overpriced and speculation is rife, but reining in prices could destroy trillions in paper wealth and outrage China's powerful middle class, creating a huge conundrum for policymakers.

So why are cryptocurrency investors freaking out? China has already essentially banned crypto mining and trading in a series of measures doled out over 2021, so it's not like there's much more Beijing can do there.

  • Our take is that the latest moves are profit-taking by (often very leveraged) crypto investors who are only just hearing about Evergrande, and mostly know that (a) it's bad for the Chinese economy and (b) as goes China's economy, so goes much of the world.
  • But this also means crypto is "increasingly an asset class like others," Protocol's fintech editor Owen Thomas told us. "Satoshi Nakamoto and other crypto inventors might have imagined a monetary tool separate and apart from the mainstream financial world, but the reality is that the world of money is increasingly embracing and becoming intertwined with crypto," he added.

The reality: It's hard to spot a direct link between a highly indebted Chinese property company based in Shenzhen and a global crypto market that mostly trades outside of China. Who should be losing sleep? Evergrande execs, Evergrande homebuyers, Xi, and equity and unsecured debt holders, probably in that order.

  • Evergrande execs who have been cooking the books or engaged in misleading marketing practices should be petrified, as criminal sanctions are very much on the table.
  • Buyers of yet-to-be delivered Evergrande homes probably had a miserable, stressed-out Mid-Autumn Festival, although the smart money says the Party finds a way to make them whole, assuming those homes were purchased "for living in."
  • Xi, laser-focused on securing a third (and likely, life) term, can't feel great about the long-tail economic risk here.
  • And anyone holding Evergrande shares or bonds should be prepared to walk away with nothing.

On Protocol | China

  • Beijing met its match: parents and their children. Those bans on private tutoring and children's video gaming looked ironclad — until grassroots citizens found workarounds like hiring live-in tutors and calling them "nannies" and renting gaming accounts from adults. But Beijing's getting wise and starting to crack down on the counter-crackdowns. Protocol's Shen Lu has the details.
  • Amazon banned 3,000 Chinese sellers, though it says it's not targeting China. Cindy Tai, the company's vice president of Asia global selling, gave the tally to Chinese media last Friday. Tai insisted the bans were due to sellers abusing the site's review function, and not "political factors." Protocol's Zeyi Yang has more.
  • Can China's biggest #MeToo case disappear? Zhou Xiaoxuan, or Xianzi, didn't just lose a legal ruling last Tuesday after a Beijing court dismissed her harassment suit for lack of evidence; mentions of her case, which once captivated the Chinese web, started to disappear, too. Shortly after the trial concluded, Weibo users who frequently discussed the trial were told their accounts were suspended — and those affected include our own Shen Lu. Read her story here.


As of February 2021, roughly one year into the pandemic, the urgency around obtaining location intelligence had skyrocketed, with one survey conducted by Boston Consulting Group finding that 95% of executives view geospatial data/mapping as important to getting business results.

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Big Brother Beijing

  • DiDi's president hits the road. Beleaguered ride-sharing giant DiDi's reportedly a candidate for nationalization, and its President Jean Liu has reportedly told associates she's leaving the company soon. Don't expect her to be the last departure: DiDi's major shareholders are still going to get rich even if the company's shares are trading well below IPO prices after their 180-day lockup expires around the end of 2021. Who needs government scrutiny when a lavish early retirement awaits?
  • ByteDance is getting ahead of regulators. The company is limiting screen time for Chinese users under 14 years of age to just 40 minutes a day, The Wall Street Journal reported Sunday. It's not surprising: Short video apps are often listed alongside video games in China as a source of negative influence on minors, and advocates of the gaming cap were already calling for similar measures to restrict short video app use. ByteDance is acting early instead of waiting for regulators to get active, and angry, again.
  • Pot, meet kettle. In court. China's top two food delivery platforms, Meituan and Ele.me, have accused each other of engaging in monopolistic behavior. They are both winning and losing at the same time. Last Monday, a local court ruled that Meituan had forced vendors to sell exclusively on its platform and is subject to a 1 million RMB fine. The next day, a court in another city ruled that Ele.me has done basically the same thing and is subject to a 80,000 RMB fine. Both companies have lost several similar cases in local courts this year. The feud will continue.

China Goes Global

  • Is China's metaverse the next big export? Listed Chinese companies with metaverse aspirations have jumped in trading, the South China Morning Post reported, with made state media warning people not to "blindly invest in such grand and illusionary concepts." If (when?) the metaverse takes off, China could become a major exporter, given its robust gaming industry and the predominance of social elements in its gaming ecosystem.
  • TikTok's data privacy comes under scrutiny, again. Ireland's Data Protection Commission, which leads the EU's GDPR investigations, opened two probes into the company over its handling of minors' personal user data and transfers of that data to China. The Irish privacy regulator is empowered to levy a fine of up to 4% of a company's global revenue; earlier this month it slapped a record $265 million GDPR penalty on WhatsApp.
  • Will Washington blacklist Huawei's spinoff? The Pentagon and the Department of Energy wanted to put Chinese smartphone-maker Honor, spun off last year following the sanction of its then-parent company Huawei, on an export blacklist. But Commerce and State disagreed, the Washington Post reported on Sunday. If U.S. federal agencies can't reach a consensus, the matter will eventually land on President Biden's desk.

Straight From China's Web

  • Dismantling China's (other) Great Firewall. After 8 years of what looked like petty link-blocking between popular Chinese consumer apps, the Chinese web is finally going to be interconnected again. Starting Sept. 17, in compliance with Beijing's order, WeChat opened access to external links in one-to-one chatting, although outside links are still blocked in group chats, according to the Chinese tech publication LatePost. Taobao, Douyin and Weibo have also unblocked external links.
  • Fertility startups catch fire. Under China's new(ish) three-child policy, startups developing assisted reproductive technologies are getting a flood of attention and investment. Shenzhen-based VitaVitro just completed a 100 million RMB ($15.5 million) series C funding round, the company's second financing in 2021, according to WeChat blogger PEdaily.cn. At least four other assisted-reproduction startups have raised cash this year, backed by institutions such as CICC Qichen Fund, Songhe Capital and Dingxin Capital. The market is lucrative: There are about 47.7 million infertile couples in China, and average gross margins across the industry are about 70%.
  • Huawei may survive without selling phones. Its dealers can't. Over a year after it started, the U.S. sanctions on Huawei have just about decimated its smartphone business. While the company has been trying hard to enter new industries, its domestic smartphone dealers don't have the same flexibility. An unnamed source who'd been selling Huawei smartphones for over five years told Chinese publication Time Weekly that dealers like him can't make any more money selling Huawei's IoT devices or lower-end phones, but they also can't switch to sell other brands due to contract requirements.

One More Thing

Tim Cook's Mid-Autumn fail

Apple CEO Tim Cook dutifully posted Mid-Autumn Day greetings on Weibo this Tuesday, wishing "everyone celebrating a happy #Mid-Autumn Festival# filled with friends, family, and all the mooncakes you can eat." But Weibo users mostly ignored the content of his post, instead swarming to comment with amusement on the fact that he had used an iPhone 12 Pro Max to tap out his greeting. "I guess you cannot afford an iPhone 13, either," one user chortled.

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