M.Stanley falls victim to China’s web “freedom”
By Wei Gu
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
HONG KONG — For Western banks, doing business in China is never easy. Morgan Stanley just found out the hard way, after the founder of Dangdang launched a foul-mouthed online tirade against the Wall Street firm for undervaluing the Internet retailer’s IPO. The spat is also a reminder that, when it comes to criticising foreign countries or companies, China’s fabled control of the Internet may have its limits.
Chinese corporate egos are surging along with explosive demand for their companies’ stock. Dangdang’s IPO valued it at about 100 times forecast 2011 earnings. Nevertheless, the shares jumped 87 percent on their first day of trading in December, triggering CEO Li Guoqing’s outburst. This prompted a row with other users of a microblogging platform who claimed to work for Morgan Stanley. Though the Wall Street firm said it believed none of its employees were involved, the exchange soon went viral.
As China becomes the world’s top source for IPOs, exchanges and bankers are scrambling for a piece of the business. Nasdaq now has 11 employees seeking Chinese listing, compared with just two in the United States. Morgan Stanley and JPMorgan worked behind the scenes for years to get the go-ahead in December to form local joint ventures in China, giving them access to its $100 billion a year securities underwriting market.
But nobody seems to be willing to rein in increasingly demanding executives. Dangdang’s official response was that Li’s use of rock and roll lyrics, which included some highly profane “mother” insults, “reflects his own interest in literature”. The harshest criticism so far has come from Li’s wife and cofounder, who said the remarks were inappropriate for a CEO — and a father.
The row also shows the limits of China’s willingness to censor the Internet. Chinese sites regularly delete offensive political remarks, but seem to take a more hands-off approach to attacks on companies or foreign countries. When it comes to bashing Wall Street banks, it seems the Chinese have as much freedom as their counterparts in the West.