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US-China Market Watch: China FDI, NYSE Delists Firms, PayPal Takes Control of Chinese Business

February 01, 2021
(Photo credit): Prasongsin

Your monthly roundup of the latest US-China business and industry news.

China outpaces the U.S. in FDI for the first time

In 2020, China was the largest recipient of foreign direct investment (FDI) in the world and beat out the United States for the first time. According to a report by the United Nations Conference on Trade and Development, foreign direct investment into the U.S. fell by 49% this past year to $134 billion in new investments, whereas in China it rose by 4% to $163 billion in new investments. The shift is attributed to Beijing’s handling of the COVID-19 pandemic, which has allowed China to recover much more quickly and grow their gross domestic product by 2.3% in 2020 when most other economies were contracting.

Although new foreign investment peaked in the U.S. in 2016 at $472 billion, the total amount of FDI in the U.S. is still much higher than in China. Research firm Rhodium Group expects that as long as the U.S. sticks to its open market model, there is “no reason to be concerned” about the decline in FDI. Globally, overall FDI fell by 42% to $859 billion in 2020, from $1.5 trillion in 2019.

NYSE delists three Chinese telecom stocks

After some back and forth, the New York Stock Exchange announced that it would delist three Chinese telecommunications companies to comply with the Trump administration’s order late last year banning Americans from investing in Chinese firms suspected of having military ties. The three firms are China Mobile, China Telecom and China Unicom, all of which are state-owned.

The NYSE first announced the delisting on New Year’s Eve but quickly backtracked that following Monday, only to announce again that they were going to move forward with the plan. However, after President Joe Biden was sworn in, the three firms filed requests for the NYSE to review and reverse the decision. NYSE rules state that a review must be scheduled at least 25 business days after a request is received.

PayPal takes full ownership of its payments business in China

California-based PayPal Holdings Inc. has become the first foreign firm in China to take full ownership of its Chinese payments business, under undisclosed financial details. PayPal acquired the remaining 30% stake in China’s GoPay on December 31, 2020, after it purchased the initial 70% the prior year. The move is part of PayPal’s plan to focus on China by providing “cross-border payment solutions” to merchants and consumers.

The deal comes in the midst of the Chinese government’s anti-monopoly clampdown on domestic e-commerce giants, including Alibaba and Tencent. Alibaba affiliate Ant Group owns Alipay, and Tencent owns WeChat Pay, both of which PayPal will be competing against.

ByteDance sets up Douyin Pay

ByteDance, which owns popular short-video app TikTok, has launched its own payments service for its Chinese version of TikTok, Douyin. Douyin’s more than 600 million daily active users can use Douyin Pay to make purchases inside the app, which many creators use to sell merchandise. The move marks Douyin’s further foray into the e-commerce industry.

Douyin Pay would compete against Ant Group’s Alipay and Tencent’s WeChat Pay, which are also available to Douyin users. Alipay and WeChat Pay have dominated the industry and, combined, make up more than 90% of the Chinese mobile payments market.

Chinese edtech firm picks banks for U.S. IPO

Tencent-backed Chinese online education company Huohua Siwei (known as Spark Education in English) has picked Goldman Sachs and Credit Suisse to work on its U.S. initial public offering, which could raise as much as $500 million. The listing could happen as soon as this year.

The company provides online education for children ages 3 to 12 in China. The edtech sector has sparked investor interest in the wake of the COVID-19 pandemic, which caused school closures in China and worldwide. Huohua Siwei raised $200 million in Series D+ funding in April 2020 and is backed by investors that include Sequoia Capital China, IDG Capital and Carlyle Group.

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