Son Jeong-ui, Suspends Investment in China Due to Technology Regulations (Comprehensive)

"Vision Fund Reduces China Investment Proportion to 11%"

Son Jeong-ui, Chairman of SoftBank Group (Photo by Bloomberg)

[Asia Economy Reporter Yujin Cho] Masayoshi Son, chairman of SoftBank Group, announced that he will halt new investments until the regulatory uncertainties surrounding Chinese tech companies are resolved.

At a briefing on the Q2 earnings on the 10th, Son said, "Regulations by Chinese authorities have become unpredictable and extensive," adding, "We plan to suspend investments in China until the regulatory risks become clear." He stated, "China remains a hub of innovation in technology and artificial intelligence, but the investment risks are significant."

Son said, "We are seeing many new regulations emerging in China. We will maintain a wait-and-see stance until it becomes clear what regulations will extend how deeply and broadly, and what impact they will have on the market."

SoftBank Group is a major investor in Chinese tech giants such as e-commerce giant Alibaba (24.85%), China's largest ride-hailing company Didi Chuxing (20.1%), and ByteDance, the parent company of TikTok. The Vision Fund's investment proportion in Chinese tech companies reaches about 23%.

Son revealed that the proportion of Chinese investments in the Vision Fund, which accounts for 23% overall, was reduced to 11% in Q2 this year.

On the same day, SoftBank announced that its consolidated net profit for Q2 (April to June) was 761.5 billion yen (approximately 8 trillion won), down 39.4% from 1.2557 trillion yen in the same period last year. Revenue for the same period rose 15.6% year-on-year to 1.4791 trillion yen.

Considering the base effect of last year's record quarterly net profit due to gains from the sale of shares in the major U.S. telecom company T-Mobile in Q2, the results are seen as relatively solid.

Bloomberg analyzed that despite the recognition of valuation gains (5.2 billion dollars) from the New York listings of Didi Chuxing (3.2 billion dollars) and Full Truck Alliance (2 billion dollars), both invested in by the Vision Fund, the investment segment's profits plunged 90% due to declines in the corporate values of Korean e-commerce company Coupang (-4.3 billion dollars) and German online shopping mall Otto Group (-0.5 billion dollars).

The report added that financial indicators have fallen to their lowest levels in the past three years, including a lower liquidity ratio and reduced short-term debt repayment capacity.

SoftBank's stock price closed slightly higher on the day but has fallen more than 35% from this year's peak.

The market assessed that the absence of additional share buybacks by SoftBank has lowered stock price expectations due to disappointment. Jeffrey analyst Atul Goyal said, "If SoftBank does not announce share buybacks, the stock price is likely to continue its downward trend."