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Why is China cracking down on it's own tech businesses? - YouTube
Channel: CNBC Television
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IS DOWN NEARLY 50% FROM ITS
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HIGHS.
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NOW AT ITS LOWEST LEVEL IN A
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YEAR, TALKING ABOUT PANDEMIC
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LOWS HERE.
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IF THE CHINESE GOVERNMENT
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CRACKDOWN IS CAUSING SO MUCH
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PAIN FOR THEIR COMPANIES, WHY
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ARE THEY DOING IT?
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JOINING ME NOW IS DEREK
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SCISSORS
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DEREK, IT'S GREAT TO HAVE YOU.
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YOU DISTINGUISH WHAT THEY'RE
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DOING ON THE TECH SIDE AND THE
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EDUCATION SIDE HERE.
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SO, EXPLAIN THAT
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>> WELL, I WOULD ACTUALLY
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DISTINGUISH TECH FROM ALMOST
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EVERYTHING ELSE.
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EDUCATION IS AN EXAMPLE OF
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SOMETHING WE SEE FROM THE
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CHINESE ALL THE TIME
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THIS SECTOR IS EXPANDING TOO
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QUICKLY.
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THEY'RE CHASING MONEY TOO
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QUICKLY, TOO MUCH, ACCORDING TO
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THE GOVERNMENT OF COURSE
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WE HAVE SOME COMPLAINTS FROM
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CONSUMERS.
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EVERYBODY CALM DOWN.
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WE'RE GOING TO GO THROUGH A
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LITTLE RECTIFICATION CAMPAIGN.
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AND THEN, YOU KNOW, YOU'LL BE
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ALLOWED TO GO BACK TO NORMAL IN
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SIX MONTHS OR A YEAR
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THAT'S VERY NORMAL FOR CHINA
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IT MOSTLY HAPPENS IN PROPERTY.
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THERE ARE CERTAINLY RISKS TO THE
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STOCKS
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BUT THE SECTOR SHOULD BE CALMER
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IF YOU LOOK FORWARD A YEAR
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TECH IS DIFFERENT BECAUSE IT'S
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REALLY ABOUT A SEA CHANGE.
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THE CHINESE HAVE SAID WE NEED TO
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CONTROL THE DATA
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ALL OF YOU NEED TO FALL IN LINE.
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WE LOVE TECH
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WE CAN DO WITHOUT THE TUTORING
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SECTOR
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IT LIVES, IT DIES, WE DON'T
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CARE
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TECH, THERE'S GOING TO BE A
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BOOMING TECH SECTOR IN CHINA,
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BUT UNDER OUR RULES.
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THEY'RE HAPPENING AT THE SAME
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TIME PEOPLE ARE PUTTING THEM
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TOGETHER
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THAT'S TOTALLY UNDERSTANDABLE.
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BUT THE PROJECTION FOR EDUCATION
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IS MORE LIKE A RETURN TO NORMAL
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IN A YEAR.
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AND TECH IS GOING TO THRIVE, BUT
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YOU BETTER FALL IN LINE.
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>> WHAT DO YOU MAKE OF THE
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TIMING OF ALL THIS
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THIS MORNING AS WELL DIDI GOT A
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DOWNGRADE ON CONCERNS ABOUT
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CHINESE REGULATION AND THEY'RE
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RUNNING AFOUL OF THE GOVERNMENT.
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WE'VE TALKED ABOUT HOW THE IPO
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AND IT LOOKS LIKE A BAD IDEA AND
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THEY HAVE BEEN WARNED.
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IT SEEMS LIKE SINCE THAT DATE --
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AND MAYBE WE SHOULD EXPAND THE
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TIME HORIZON BACK TO LAST FALL
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AND INITIALLY RAISED THE IRE OF
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THE CHINESE COMMUNIST PARTY.
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WHAT SEQUENCE OF EVENTS HERE IS
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PLAYING OUT?
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WHAT'S THE CATALYST?
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WHERE IS IT GOING?
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OR ARE WE JUST LUMPING THESE ALL
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TOGETHER BECAUSE THEY'RE
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HAPPENING ALL AT ONCE AND
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THERE'S NOT ACTUALLY ANY
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CONNECTION
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>> I DO THINK THERE'S A
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CONNECTION WITHIN TECH, AND I
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THINK YOU HIT TWO OF THE EVENTS.
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THE CHINESE TRIED TO WARN
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EVERYONE BY DELAYING THE IPO IN
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PART BECAUSE XI JINPING WAS MAD
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AT JACK MA
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THEY DISCOVER WHAT THEY SEE AS
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PROBLEMS AND WHO'S CONTROLLING
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THE TECH, THE DATA, RATHER
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IF YOU'RE GOING TO LIST OVERSEAS
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AND MAKING MONEY MAYBE YOU'LL
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START FOLLOWING THEIR RULES AND
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NOT OUR RULES.
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SOMEHOW DIDI DOESN'T GET THE
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MESSAGE OR SO EAGER FOR IPO IT
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DOESN'T LISTEN
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THEY HAD TO SEND ANOTHER MESSAGE
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AND THERE IS A RISK OF YET
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ANOTHER MESSAGE.
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THERE MAY BE ANOTHER COMPANY
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TARGETED IF THEY'RE NOT
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UNDERSTANDING THAT YOU WILL
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FOLLOW OUR DATA RULES.
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I DON'T CARE HOW MUCH MONEY
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YOU'RE MAKING OVERSEAS OR
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GETTING FROM FOREIGN INVESTORS
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SO, I THINK THE JACK MA EVENT,
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THE DIDI EVENT, THOSE ARE
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CONNECTED AND PEOPLE ARE
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INTERESTED IN THE CHINESE TECH
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SECTOR
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THEY HAVE GOOD REASONS
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BUT THEY SHOULDN'T BE SURPRISED
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IF THERE'S A THIRD CRACKDOWN
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LIKE THESE TWO
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>> PROBABLY THE BIGGEST NAME IS
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ALIBABA.
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WHAT ARE YOUR THOUGHTS ABOUT
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THAT, THE RISKS THEY'RE EXPOSED
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TO NOW, THE GROWTH PROSPECTS IF
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IN THE LONG RUN IT'S GOOD TO
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HAVE THESE TECH BEHEMOTHS?
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>> THERE'S TOO MUCH MONEY IN
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ALIBABA.
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I DON'T SEE TOO MUCH DOWN SIDE
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RISK
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THERE'S TOO MUCH MONEY IN
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ALIBABA FOR THE CHINESE TO WANT
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TO CUT THAT CONTIDUIT OFF
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THAT BENEFITS THE CHINESE
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ECONOMY.
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AT THE SAME TIME, THEY WANT TO
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KEEP ALIBABA FROM BECOMING A
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THREAT TO THEIR FINANCIAL
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SYSTEM, FROM DRAWING SAVINGS
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AWAY FROM STATE BANKS AND SO ON.
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THE DOWN SIDE RISK FOR ALIBABA
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IS SOMEWHAT LIMITED BUT SO IS
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UPSIDE GAIN BECAUSE REGULATORS
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DON'T WANT ALIBABA TO BE THAT
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LARGE AND THAT PROFITABLE.
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AT SOME POINT YOU COULD SEE
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PRESSURE FOR A SPLIT TO BUY THE
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COMPANY UP WHERE BOTH COMPANIES
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LOOK PRETTY GOOD BUT DON'T HAVE
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THE SIZE AND REACH
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IT'S TOO BIG TO FAIL BUT IN
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CHINA YOU CAN BE TOO BIG TO
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SUCCEED.
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>> DOES THAT MEAN SOME OF THESE
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CHINESE TECH NAMES ARE BECOMING
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UTILITIES, IN OTHER WORDS
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TRADING ALMOST LIKE BONDS?
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I KNOW THAT SEEMS INSANE TO SAY
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AFTER THE PAST 12 MONTHS
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BUT GOING FORWARD, IF THE DOWN
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SIDE AND UPSIDE IS CAPPED, IF
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THEY'RE EXTENSIONS OF THE STATE,
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THEY HAVE MONOPOLY PROTECTION
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BUT ALSO NOT THAT MUCH DOWN
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SIDE
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>> RIGHT
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THAT'S GOING TO BE PART OF THE
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SECTOR
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I THINK THAT'S WELL PUT FOR WHAT
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PART OF THE SECTOR LOOKS LIKE.
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YOU KNOW, IF YOU HAVE DATA THE
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STATE CONSIDERS ESPECIALLY
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VALUABLE, YOUR OPERATIONS ARING
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G
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GOING TO BE RESTRICTED
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AND THEREFORE YOUR UPSIDE IS
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GOING TO BE LIMITED.
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THAT'S REALLY THE INVESTOR
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EVALUATION THAT HAS TO GO ON IN
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CHINESE TECH SECTOR.
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ARE YOU BACKED BY THE STATE AND
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STRATEGIC AND THERE'S A HUGE
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CHINESE MARKET
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GREAT.
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DO YOU HAVE DATA THE
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GOVERNMENT'S GOING TO CONTROL
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WHICH IS GOING TO MEAN THEY'RE
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LOOKING OVER YOUR SHOULDER, MEAN
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FOREIGN REGULATORS ARE UNHAPPY
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WITH THEIR OPERATION BECAUSE
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THEY THINK YOU'RE GOING TO TURN
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THE DATA BACK TO CHINA
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THAT'S GOING TO CAP YOUR UPSIDE.
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SO, YOU HAVE THAT CERTAINLY
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RIGHT FOR PART OF THE SECTOR
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SOME OF THESE STOCKS ARE NOT
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GOING TO BE GROWTH STOCKS.
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AND THE SEENE KE
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