Partner Eddie Wong quoted in the Wall Street Journal on the impact of the Chinese stock market plunge on US-Chinese joint ventures
Investors chat as they check stock prices at a stock firm in Hangzhou, eastern China’s Zhejiang province on July 8, 2015. China’s benchmark Shanghai stock index was down more than 4.5 percent by mid-morning as additional government moves failed to shore up the tumbling market and contagion began to spread elsewhere.
As China tries to stem the fallout from a stock market plunge, U.S. companies in joint ventures with Chinese ones may be in for a rocky ride.
Shares on the country’s main Shanghai market dropped 5.9% Wednesday, continuing a slide of nearly a third since mid-June.
Whether U.S. companies consider a write-down of Chinese assets depends on the nature of the joint venture, said Andreas Chrysostomou, a managing director in the valuation advisory services group for Duff & Phelps Corp., a financial advisory group. He doesn’t “see companies taking immediate action,” he added.
Companies involved in joint ventures with Chinese firms include General Motors Co. and WhiteWave Foods Co., the Denver-based maker of plant-based foods and beverages, such as Silk soy milk.
GM has a 50-50 joint venture with SAIC Motor Corp., called Shanghai GM. White Wave Food in 2014 entered into a joint venture with China Mengniu Dairy Company Ltd.
GM declined to comment on the China’s financial markets. A company spokesman said the automaker is “focused on building our leadership position there.”
WhiteWave Foods did not return requests for comment.
If companies are making money, despite a selloff, there may be little need for a write-down, said Eddie Wong, a director for the Asia practice at accounting firm Friedman LLP.
“Everything is coming around too fast and too soon,” he said. “I don’t think everyone is ready to take out their calculators to calculate the write-down.”
He said there may still be some downward adjustment of the Shanghai index before the end of the third quarter.