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Trans-Pacific financial news


During the final day of August this year, SPD Silicon Valley said that it would become a wholly owned unit of the Shanghai Pudong Development Bank, under the name Shanghai Innovation Bank. 
Why do I care?  Isn't this just a name change on the other side of the world from me? Well, it IS that. But it has some symbolic significance. 
SPD Silicon Valley began life as a joint venture of Shanghai Pudong Development [SPD] on the one hand and the important northern California financial institution, Silicon Valley Bank, on the other. 
Silicon Valley Bank was what one would imagine it was from the name: it was for years a bank important to the venture capital and high-tech entrepreneurial world in the Bay Area. It arranged an alliance with SPDB in order to try to make itself a player of global reach, not merely an important regional institution. The creation of their joint venture, SPD Silicon Valley, was an expression of that alliance. 
In March of 2023, Silicon Valley Bank went belly-up, for a number of reasons I won't get into here. It was one of the largest bank failures in US history and caused a lot of analysts to wonder, though only briefly, whether we were seeing a replay of 2008. We weren't. 
The bankruptcy court sought to sell SVB's interest in the joint venture.  No buyers stepped forward. THAT is the background of the latest development.  The value of the American side of the deal is being zeroed out. That of the Chinese side is being re-calculated at 100%. The name change is a formal acknowledgement, "we're putting our California tie behind us."
Again: why do I care? It is a symbol for the ways in which two important facts can tug us in different directions though they are both true: the China/US relationship is important and will over time become more so -- there is money to be made here by those willing to forge ties; at the same time, it is inevitable that some of those ties will snap, some of the money invested in making them work will be lost.
There is reward to be had BECAUSE there is risk to be taken. 


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  1. Paul D. Van PeltSeptember 7, 2024 at 9:35 AM

    I suppose free enterprise is a misnomer in some ways, namely, enterprise is not free---there are risks associated with big business. You can own the farm, or, you can lose your shirt.

    ReplyDelete
    Replies
    1. ChristopherSeptember 8, 2024 at 12:12 AM

      Indeed. Although free enterprise is "free as in speech" it is never "free as in beer".

      Delete

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