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Online Army Attacks China’s Nongfu Spring Plunging Stock

Nongfu Spring the target of online campaign targeting products and personalities

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Nongfu Spring

Nongfu Spring a Chinese beverage behemoth, is the latest large brand to face criticism from an online army of nationalist individuals. This highlights the difficulty for local corporations operating in an increasingly patriotic climate.

Netizens on local forums have called for a boycott of Nongfu Spring products after the founder of rival Hangzhou Wahaha Group died on February 25, sparking a wave of negative comparisons. That has weighed on its shares, falling over 6%, making it one of the worst performers on the Hang Seng China Enterprises Index.

Users have criticized everything from Nongfu Spring’s packaging, which some argue contains elements associated with Japan, to the business tactics of founder Zhong Shanshan — China’s wealthiest person — including a decades-old debate over the superior quality of its water in comparison to Wahaha and other brands.

Nongfu Spring stock

Some have also claimed that Zhong’s kid owns a US passport, infuriating netizens who question the family’s loyalty to China.

Nongfu Spring executives did not immediately respond to Bloomberg’s email requests for comment, and calls to the company went unanswered.

Some Chinese businesses have benefited in recent years from nationalist sentiment, which has caused consumers to migrate from major global brands to domestic ones. However, the online outrage over Nongfu Spring underscores the risks that even domestic companies might face as they negotiate rising nationalistic strain.

It also presents a problem for the government as it seeks to rebuild the mainland’s floundering private sector — after years of regulatory crackdowns and a fragile economy eroded entrepreneurs’ trust — to fulfill this year’s ambitious 5% growth target.

Nongfu Spring has already faced internet backlash from patriotic netizens. In 2021, the company was chastised on Weibo for a promotional campaign for one of their new beverages that mentioned peaches from Fukushima, the Japanese region that experienced a nuclear leak following the devastating 2011 earthquake.

Nongfu Spring stock

Nongfu Spring  sees steep sales decline

According to domestic media sources, Nongfu Spring’s sales have plummeted, wiping off around HK$30 billion (US$3.8 billion) in market capitalization over the last two weeks, even though Chinese equities trading in the city have gained slightly during the same period.

Founder Zhong issued a statement earlier this month defending the company and himself. While recognizing that Nongfu Spring and Wahaha had filed litigation against each other following the water dispute, he stated that he and his competitor’s late chairman, Zong Qinghou, had eventually reached an agreement.

According to the message posted on the Nongfu Spring Weibo account, his “respect for Mr Zong’s entrepreneurship has never wavered.”

It was insufficient to satisfy online users, who reacted to the remark, requesting Zhong to clarify his son’s citizenship and complaining about the flavour and quality of Nongfu Spring’s water.

“Does your son have US citizenship? How about your whole family? “I’m not going to buy your products anymore,” one Weibo user stated.

Nongfu Spring’s internet difficulties contrast with the Chinese government’s vow to protect private entrepreneurs from hate speech. To reduce the chance of such efforts becoming a larger political problem, the government often controls nationalist sentiment online.

The Supreme People’s Court has recently threatened to crack down on “malicious attacks” on entrepreneurs, promising to punish “extreme language and acts” as part of attempts to foster an environment conducive to developing the private sector.

 China Vanke

Meanwhile, Chinese banks are reportedly trying to bail out one of the country’s largest property developers after Moody’s lowered its credit rating to “junk” on Monday.

Beijing has been working hard to rebuild faith in the country’s faltering real estate business, and it looks that China Vanke is on a mission to avoid the fate of Evergrande and Country Garden, both of which defaulted on their obligations and are on the verge of liquidation.

Chinese state media said Tuesday that 12 major banks, including the six largest state-owned institutions, were in talks to give Vanke with a syndicated loan worth up to 80 billion yuan ($11.2 billion) to fulfill looming repayment deadlines.

The loan amount is yet unknown, according to state media outlet Cailianshe, citing an unnamed source familiar with the planned transaction. Another official media site, the Economic Observer, said that various insurance companies had dispatched teams to Vanke’s headquarters for a new round of debt discussions in an effort to avoid a default according to CNN.

Vanke’s stock rose sharply in Hong Kong and Shenzhen following reports of potential new financing. On Tuesday, its Hong Kong-listed shares rose 10.3%, while its Shenzhen-traded stock increased 5.7%. However, they have remained in negative territory so far this year.

On Monday, Moody’s downgraded Vanke’s rating to Ba1, which is commonly known as a junk rating. That means the corporation must offer a higher yield on its bonds to compensate for the increased risk of payment default that bond investors assume.

Vanke’s contracted sales fell 10% in 2023, reaching 376.12 billion yuan ($52.4 billion). In January 2024, its revenues fell by 32%.

Investors have been selling Vanke’s stock in recent months. Its Hong Kong-listed shares is down roughly 30% since November. So far this year, it is down 9%.

 

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