China Busts a $3B Underground Bank
The Chinese art of selectively enforcing their laws to the detriment of those that won&#x27;t play ball with the government really makes it hard to believe Xi&#x27;s press-tornado of successful anti-corruption measures.<p>The government has been actively extorting international companies into &quot;joint&quot; ventures. These ventures essentially require &quot;treats&quot; (as an insider told me) every several months. These treats would be manufacturing processes, engineering drawings of proprietary IP, or technical training for their engineering staff. Boards of Directors can&#x27;t ignore the scale of the Chinese market, but it comes at the cost of essentially giving away your business prospects within the country inside of 15 year window.<p>China&#x27;s current long-term strategy seems to be:<p>1) Spend an egregious amount to woo top talent [1], [2]<p>2) Learn from them over the next 5-10 year period [2]<p>3) Transcend the need for foreigners in China<p>It&#x27;s a pretty terrifying environment and many Chinese investors are desperate to get their money into foreign investments [3]. Instead of laundering illegally earned money, they are laundering legally earned money that they can&#x27;t get out of China. At least that is the hearsay that I&#x27;ve heard from several different sources (VC events, friends of friends etc).<p>[1]: <a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2017&#x2F;01&#x2F;04&#x2F;world&#x2F;asia&#x2F;china-soccer-xi-jinping.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2017&#x2F;01&#x2F;04&#x2F;world&#x2F;asia&#x2F;china-soccer-x...</a><p>[2] Qi Lu, Baidu&#x27;s COO YC interview: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=WSydk0XzxEE&amp;t=351s" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=WSydk0XzxEE&amp;t=351s</a><p>[3]: <a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2017-01-03&#x2F;china-drills-down-into-forex-transactions-as-money-exits-abroad" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2017-01-03&#x2F;china-dri...</a>