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China enacts new foreign investment security review measures

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On 19 December 2020, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly issued the Measures for Security Review of Foreign Investment (New Measures) (the official Chinese text is available here; and an unofficial translation is available here). The New Measures, effective from 18 January 2021, represent China’s continued efforts to provide a clearer legal regime for national security review comparable to similar procedures in other developed economies, such as the CFIUS review in the United States.

How are the New Measures different from the existing regulations?

China’s national security review was first introduced in 2011 by the Circular of the General Office of State Council on the Establishment of Security Review for the Merger and Acquisition of Domestic Enterprises by Foreign Investors (2011 Circular). The 2011 Circular set forth a national security review regime where, similar to the foreign investment approval regime prior to the enactment of the Foreign Investment Law on 1 January 2020, MOFCOM would take the lead in the review of foreign investment for national security concerns in coordination with other government agencies. From 2015, the State Council issued the Circular on Issuing the Provisional Measures for National Security Review of Foreign Investment in Pilot Free Trade Zones (Free Trade Zone Circular), under which a slightly modified security review regime was created for foreign investment in the Shanghai, Guangdong, Tianjin and Fujian Pilot Free Trade Zones.

The New Measures apply to foreign investment in the entire territory of China, including the Pilot Free Trade Zones. While the New Measures seem to have combined features of both the 2011 Circular and the Free Trade Zone Circular, there are several notable new developments.

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(a) Indirect investment covered

The most prominent difference is that the New Measures are intended to cover both direct and indirect foreign investments in China, in contrast to the existing national security review that applies only to foreign direct investment. As such, it seems that any investor acquiring indirect “actual control” of a Chinese target covered by the New Measures in an offshore transaction will likely be subject to a national security review in China.

The New Measures also apply to greenfield investment that is excluded from review under the 2011 Circular1. Under prior regulations, foreign investment in the financial services sector was supposed to be subject to separate legislation but such legislation was not issued. The New Measures are intended to also apply to foreign investment in the financial services sectors.

(b) Joint working mechanism

Another different feature is that the New Measures establish a working mechanism jointly headed by NDRC and the MOFCOM at the central level. A Working Office will be set up under NDRC but will be jointly led by NDRC and MOFCOM, who will be responsible for the national security review of foreign investment. Unlike the prior regulations under which MOFCOM or its local counterparts are responsible for accepting security review filings, the Working Office is now authorized to accept direct filings submitted by the investor.

(c) Staged review process

The New Measures also modify the existing review process. Under the New Measures, the security review will be a three-stage process as follows:

  • Jurisdiction review: The Working Office has 15 working days (as opposed to five working days under the existing regulations) to determine whether they will commence a security review of the investment in question.
  • General review: If the Working Office decides to commence a security review, they will then have 30 working days (similar to the review period under the existing regulations) to perform a general review of the investment in question. After the general review, the Working Office will either approve the transaction or decide to commence the special review process.
  • Special review: The special review can take up to 60 working days (similar to the review period under the existing regulations) and may be extended if circumstances so require. Under the prior regulations, the investment in question may be referred further to the State Council for determination. Such a referral no longer exists under the New Measures so the Working Office is authorized to make a final determination upon the special review.

(d) Whistle blower mechanism

The New Measures permit any person to report to the Working Office and request the Working Office to commence a review in respect of any foreign investment if such a person believes there is a national security concern.

What are the issues with the New Measures?

There are still a number of issues to be clarified under the New Measures. For example, “national security” remains undefined and there is no clear guidance on what elements the Working Office will consider in determining whether there is national security concern2.

Further, covered sectors under the New Measures include, other than the military or national defense related business:

  • key agricultural products, key energy and resources
  • key major equipment manufacturing
  • key infrastructure, key transportation services
  • key cultural products and services
  • key information technology and internet products and services
  • key financial services
  • key technology
  • other key sectors

What is considered “key” is not set out in any regulation, leaving the Working Office with discretion to make a determination that may shift with changes in China’s foreign investment policies or national security outlook from time to time. Based on our recent experience, certain businesses requiring a value-added telecommunications service operating license could be subject to national security review. Further, with the recently revised technology export catalogue, foreign investment in Chinese big data or artificial intelligence companies may also be subject to national security review.

What should foreign investors do?

The national security review under the New Measures is a mandatory regime as it is under the prior regulations. Any investment project falling within the ambit of the New Measures that will be closed after 18 January 2021 will be required to be notified to the Working Office for a review. Therefore, investors who are currently investing or proposing to invest in China need to consider whether a national security review filing is triggered under the New Measures. Moreover, those who have already owned investments in China and are looking to dispose directly or indirectly of their interest in such investments will need to consider whether the potential buyer will require a national security review in China.

Source: – Lexology

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Amazon Adds $2.75 Billion To Anthropic Investment, Sora Goes To Hollywood – Forbes

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Amazon invests $2.75 billion in Anthropic. This brings Amazon’s investment to $4 billion, as it follows its previous investment of $1.25 billion, which gave the company the option to invest the additional funds. This comes as Anthropic’s new Claude-3 chatbot outperforms ChatGPT- 4 in recent tests. Amazon has unique insight into Anthropic’s performance as it is one of the suite of AI models offered by AWS, which include most of Claude’s competitors.

Sora Goes To Hollywood. Everyone is reacting to a Bloomberg report that OpenAI will soon be meeting with studios and other Hollywood stakeholders to demonstrate the capabilities of the text-to-video generator and explore partnerships. OpenAI says unnamed “A list” directors are already using it.

Based in Toronto, shy kids are a multimedia production company who utilized Sora for the above short film about a man “who is literally filled with hot air.” His head, as you can see, is a yellow balloon. “We now have the ability to expand on stories we once thought impossible,” shares the trio made up of Walter Woodman, Sidney Leeder and Patrick Cederberg. Walter, who directed Air Head, said as great as Sora is at generating things that appear real, what excites us is its ability to make things that are totally surreal.

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Neuralink Shows Paralyzed Patient Playing Chess on a PC. Elon Musk’s brain-computer interface company shared a video of its first human patient, Noland Arbaugh, playing chess and Civilization VI using their brain implant. Arbaugh, who is paralyzed below the shoulders, described the experience as “just stare somewhere on the screen” to move the cursor. While some experts see this as a promising step, others emphasize that it’s still early days and the technology has limitations. Arbaugh acknowledged that there’s still work to be done, but the implant has already changed his life.

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Illuvium Labs Raises an additional $12 million for NFT Gaming Universe. Following an extensive three-and-a-half-year development journey and $60 million in funding, Illuvium Labs is on the cusp of unveiling its interoperable gaming universe. It will feature three interconnected titles designed to utilize the same NFTs seamlessly across all games, promising a first-of-its-kind experience. The influx of $12 million in Series A funding from esteemed firms like King River Capital, Arrington and Animoca will be allocated to developing new gaming titles within the Illuvium ecosystem.

Databricks’ DBRX claims the crown as best open-source LLM. It’s a list that includes Meta’s Llama 2 and Mistral’s Mixtral. Leading companies like OpenAI, Google, and Anthropic sell, or rent, their proprietary private models to enterprises and subscribers. DBRX was produced for just $10 million, orders of magnitude less than its competitors. On Monday, Wired reported that the company showed data proving its AI model’s reading comprehension, answers to general knowledge questions, and coding is superior to other open-source models that can be downloaded from Hugging Face and modified by users.

Shiba-Inu Metaverse leader steps down amid dispute over IP. Marcie Jastrow, the well-regarded Hollywood executive who led Technicolor’s XR efforts, has left the company. This led the company’s legions, known as the Shib Army, to speculate about malfeasance, which is easy to do, because Jastrow is the only person involved who is not anonymous, including Ship’s charismatic leader Shytoshi Kusama.

This live football experience was built by Immersiv.io to showcase how AR can transform the live sports broadcast and fan experience using the Apple Vision Pro. Immersiv.io worked with the Bundesliga (the German Football League) on the production. In a post on X, the company said. “This is a 3D reproduction of the live game integrating TRACAB Gen 6 live skeletal data of all players and the ball, complemented with real-time insights, offering the ultimate live tactical perspective of the game.”

SXSW 2024: XR That Makes You Go Wow. The XR competition was won by an AI experience, The Golden Key. This is the second year in a row that an XR experience did not take the immersive festival’s grand prize.

The second annual AI Film Festival is coming to Los Angeles on May 1, and New York May 9. Seats are limited, request to attend at http://aiff.com

This column, once called “This Week in XR,” is also a podcast hosted by author Charlie Fink, and Ted Schilowitz, former studio executive and co-founder of Red Camera, and Rony Abovitz, founder of Magic Leap. This week our guest is Liz Hyman, CEO of the XR Association. We can be found on Spotify, iTunes, and YouTube.

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Where Will Virtual Reality Take Us? (Jaron Lanier/New Yorker)

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FP Answers: What is a 'behavioural edge' in investing and how does it affect returns? – Financial Post

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Temperament is the unsung hero of investing success

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By Julie Cazzin with Felix Narhi

Q: What is a “behavioural edge” in investing? How does it potentially enhance returns? How can an investor develop it? — Giovanni

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FP Answers: Giovanni, the term behavioural edge is just another way of saying “temperament,” which refers to the habitual way a person behaves in each situation. For example, one person may be easygoing and relaxed while another is more likely to be impatient and assertive.

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Temperament is the unsung hero of investing success. Gaining insight about our innate emotional temperament and learning how to work with it gives investors an edge.

The common misconception is that you need a high level of intelligence to be a successful investor. No doubt, that can be helpful, but based on many years in the industry, I’ve seen it is not always the most important differentiator.

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Once someone has at least an average level of intelligence, it is temperament that often provides the investing edge in leading to better returns over the long term. “Investing is not a business where the guy with the 160 IQ beats the guy with the 130 IQ,” famed investor Warren Buffett has pointed out.

Having the right temperament can potentially enhance investment returns in several ways. An investor who is very reactive to external events is likely to fare poorly over the long term because, quite simply, the world is full of uncertainty and always will be. Markets are highly reactive, abetted by algorithmic trading and automatic rebalancing by exchange-traded funds. Individual investors should not be.

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Research shows that investors who trade frequently or try to time the market underperform. On the other hand, those investors who can remain calm and patient throughout market cycles do better because markets historically trend upwards. Hands down, being calm, cool and collected is the right temperament for an investor to have.

The concept of “homo economicus” — or economic man — describes a hypothetical person who consistently makes rational decisions. In real life, our decisions are coloured by our formative experiences, moods, external circumstances, what we ate for lunch and a host of other factors. These influences drive our behaviours, but they often operate below conscious awareness (even artificial-intelligence apps “hallucinate”).

Given that behaviour is some combination of cognitive and emotional inputs, an investor can create an edge by developing a disciplined investment process that overrides temperament, especially during highly volatile periods.

The term “active patience” means being clear about your investment principles and what you are looking for, and practicing active patience until the right opportunity arises.

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In contrast, regular patience is making an investment decision and sticking with it no matter what, even if it was the wrong decision. The latter approach is unlikely to bring financial success, which is the major goal of investing.

Active patience is what Buffett would call the “fat pitch,” which occurs when the market (occasionally) presents a very attractive opportunity. It is easy to spot a great opportunity and take full advantage of it when an investor has clear principles on what they are looking for.

Can we change our temperament? Recent studies show that personality traits and moods are subject to change, sometimes within the hour, so temperament may not be as fixed as we’ve been led to believe.

Becoming a better investor starts with self-knowledge — and lots of practice. The behavioural traits associated with good investment outcomes are patience, discipline, emotional control and risk awareness. It so happens, these qualities lead to good life outcomes, too. A calm temperament is the bedrock of making sound investment decisions.

Every investor must determine for themselves how to achieve greater equanimity and there is no shortage of books, videos and TikTok tutorials on that evergreen topic. I would also add the importance of staying humble.

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In investing, as in life, the learning never stops. Staying open to new information and having the courage to challenge our own and others’ beliefs and habitual behaviours are the keys to future success.

Felix Narhi is chief investment officer and portfolio manager at PenderFund Capital Management Ltd.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

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Lenders Rally After India’s Central Bank Eases Investment Curbs – BNN Bloomberg

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(Bloomberg) — Indian banks and shadow lenders rose Thursday after the country’s central bank eased capital requirements for a unique type of investment, a move that may free up more funds for loans.

The gains came after the Reserve Bank of India issued Wednesday modified rules on lenders’ required provisions for exposure to alternative investment funds, or AIFs, that invest in the lenders’ borrowers. Under the new policy, a lender needs to set aside capital only for the amount the AIF invested in the debtor company, and not the entire investment of the lender in the AIF.

Shares of Piramal Enterprises Ltd., which reported among the biggest provisions for such investments, closed 1% higher after rising as much as 6% during the day. A gauge of financial services firms climbed 1%, the most since March 1.

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Lenders led the rally in the broader market, with the NSE Nifty 50 Index registering its best day since beginning of the month.

The RBI’s softening stance came after industry players raised concerns over clarity and uniformity after it announced in December restrictions on lenders’ exposure to AIFs that hold stakes in their borrowers. The latest move will likely help firms including Piramal, HDFC Bank Ltd. and IIFL Finance Ltd. reverse some of their relevant provisions made previously, according to analysts at Citigroup Inc. and Jefferies Financial Group Inc.

Read more: India’s Crackdown on Financial Risks Puts Industry on Watch

“Select private banks and NBFCs like Piramal had provided for their entire AIF exposure during 3Q and could see some write-backs in 4Q if they decide to reverse the excess provision,” Jefferies analyst Bhaskar Basu wrote in a note.

Regulators introduced a flurry of new rules last year to prevent a buildup of financial stress at a time when India’s economy remained resilient in the face of rising interest rates, slowing global growth and unabated geopolitical tensions.

©2024 Bloomberg L.P.

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