The state has banned virtual currency mining, but Xinyang Maojian chose to "run into the muzzle of the gun"

According to Blockchain Daily (Hangzhou, reporter Xu Cihao), since the Financial Stability and Development Committee of the State Council made its statement, my country has launched a new round of virtual currency regulation, from rectifying mining to strictly prohibiting transactions, with layers of tightening and interlocking. Especially in the mining sector, Inner Mongolia, Xinjiang, Sichuan, Qinghai, and Yunnan have successively introduced strict regulatory measures, "one size fits all" for mining companies.

However, in the face of huge profits from virtual currency mining, some companies have taken risks to invest in mining businesses regardless of changes in the regulatory environment. Xinyang Maojian, a Hong Kong-listed company that was once on the hot search due to its "touching porcelain" of Kweichow Moutai (2058.000, -16.97, -0.82%), has once again become a hot topic in the blockchain field.

Recently, Xinyang Maojian announced that it is working with a professional team to establish a special purpose acquisition company (SPAC) and plans to conduct an initial public offering for SPAC, with an estimated fundraising of US$40 million to US$50 million. The purpose is to acquire some potential big data and blockchain projects.

Blockchain Daily learned that this SPAC project is mainly based on virtual currency mining, with Xinyang Maojian's subsidiary in Heihe, Heilongjiang as the operating entity.

Industry insiders told the reporter of Blockchain Daily that Xinyang Maojian has a history of taking advantage of hot topics, such as tea and Moutai, and now blockchain. These behaviors are not only unhelpful to the corporate image, but will become a laughing stock in the capital market. Moreover, under the circumstance of stricter domestic regulatory policies, Xinyang Maojian, as a listed company, is so openly engaged in virtual currency mining, which puts the listed company at great risk.

Rectifying virtual currency mining is a national strategy

On May 21, the Financial Stability and Development Committee of the State Council held its 51st meeting, and specifically proposed to resolutely prevent and control financial risks, crack down on Bitcoin mining and trading activities, and resolutely prevent individual risks from spreading to the social field.

This sets the tone for a new round of virtual currency regulation in my country.

On May 25, the Inner Mongolia Development and Reform Commission took the lead in issuing the "Eight Measures on Resolutely Cracking Down on Virtual Currency "Mining" (Draft for Comments)", proposing different crackdown and punishment strategies according to eight categories of targets. Whether it is virtual currency "mining" or money laundering and illegal fundraising in the transaction process, they will face punishment and accountability.

Subsequently, Xinjiang, Qinghai, and Yunnan all introduced policies that "cut across the board" on virtual currency mining. Since Sichuan is mainly based on hydropower, and many mining companies have entered the local hydropower consumption park, many miners had hoped that Sichuan would "show leniency."

However, what was supposed to come finally came. On June 18, the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Bureau jointly issued the "Notice on Cleaning Up Virtual Currency "Mining" Projects", requiring all power generation companies to conduct self-inspection and self-correction, and all municipal (state) governments to conduct a dragnet investigation, immediately stop supplying power to virtual currency "mining" projects, and report the self-inspection, cleanup and rectification situation to the Development and Reform Commission before June 25. It also listed 26 suspected virtual currency "mining" projects in detail, and limited the completion of the screening, cleanup and shutdown work before June 20.

From this, it can be seen that this round of rectification of virtual currency mining is a national chess game, with different deployments in different regions, and there is no room for "taking advantage of loopholes".

Xinyang Maojian gets involved in blockchain mining

Although regulatory policies have become stricter, Xinyang Maojian is still "defying the will of the world".

On June 6, Xinyang Maojian announced that it expects to raise US$40 million to 50 million to establish a special purpose acquisition company (SPAC) with the aim of acquiring some potential big data and blockchain projects.

Xinyang Maojian pointed out that by establishing a SPAC, resources can be used to explore new economic fields such as big data and blockchain. With the geographical advantages of being located in Heihe City, including the low-energy computing advantage enjoyed by being located in a high-altitude cold area, and the relatively stable electricity price advantage, it provides all-round support for SPAC's acquisition projects to achieve the best synergy and maximize benefits.

In fact, this is not the first time that Xinyang Maojian has proposed to enter the blockchain field.

As early as March 16 this year, Xinyang Maojian issued an announcement stating that its 90%-owned subsidiary Heihe Longjiang Chemical Co., Ltd. (hereinafter referred to as Heihe Longjiang) and Heihe Shark Technology Co., Ltd. (hereinafter referred to as Heihe Shark) had signed a project cooperation agreement, and Heihe Longjiang and Heihe Shark would establish a joint venture company.

According to the announcement, Heihe Longjiang and Heihe Shark will each hold 50% of the equity in the joint venture. Both parties must fulfill the following responsibilities: Heihe Longjiang will inject 30,000 square feet of land, factories and office buildings on the land, 110,000 volt substations, wires and power supply facilities; Heihe Shark will inject its own cryptocurrency business, big data business, related personnel, product technology, all related intellectual property rights and RMB 150 million into the joint venture.

On April 13 this year, Xinyang Maojian issued another announcement stating that Heihe Longjiang Chemical Co., Ltd., a subsidiary of the group engaged in the production and sales of calcium carbide, is located in the Heihe City Russian Processing Park. It is the only region in the country that imports electricity from Russia. The clean energy hydropower used in the import from Russia is in line with China's carbon neutrality policy, and the electricity price is relatively stable. Therefore, Heihe Longjiang is very suitable as a production base for high-energy-consuming industries such as big data processing centers, coal chemical industry, metallurgy, and cryptocurrency computing industries.

Through Tianyancha's equity penetration, the reporter of Blockchain Daily found that the only shareholder of Heihe Longjiang is the wholly foreign-owned Zhenglong Group Co., Ltd. According to the announcement issued by China Tianhua Group (the predecessor of Xinyang Maojian) on March 18, 2016, it acquired 90% of the shares of Zhenglong Group at a cost of HK$142.97 million, and Zhenglong Group invested in Heihe Longjiang Chemical Co., Ltd. on February 1, 2021, with a subscribed amount of 265 million yuan.

It can be seen that the main business of the joint venture will be virtual currency mining. The reporter called Heihe Longjiang, but no one answered the phone.

A reporter from Blockchain Daily called Black River Shark to inquire about the progress of cryptocurrency and "mining" business. The operator replied that he could not answer and then hung up the phone.

According to the business information on Tianyancha, Heihe Shark was established in November 2017 with a registered capital of 1 million yuan. The company's sole shareholder is Heihe Yinhe Economic and Trade Co., Ltd., which also has a registered capital of 1 million yuan and paid 500,000 yuan in November 2020. Its main businesses include customs declaration, logistics, import and export, trade consulting, overseas exhibitions, and the Internet data center business in the first category of value-added telecommunications services (excluding Internet resource collaboration services).

The reporter of Blockchain Daily called Heihe Galaxy Economic and Trade Co., Ltd. again, but was hung up on several times.

Cai Kailong, a senior researcher at the Institute of Financial Technology of Renmin University of China, said in an interview with the Blockchain Daily reporter that China is now cracking down on virtual currencies, and all provinces are strictly prohibiting virtual currency mining. Xinyang Maojian is now going against the trend. Of course, it is not ruled out that these companies are hyping up stock prices and releasing some good news to raise stock prices.

I'm addicted to name changing

According to reports, Xinyang Maojian is a Hong Kong-listed company mainly engaged in chemical business. Its predecessor was "China Tianhua Chemical", and its earlier names included "Dongjun Chemical Group" and "Daqing Petrochemical". Its main businesses are polyvinyl chloride, heat and electricity, vitamin C, glucose and calcium carbide.

According to an announcement made by China Tianhua (the predecessor of Xinyang Maojian) on January 5, 2018, the company acquired Xinyang Maojian International Holdings for a consideration of HK$85.8 million through a public offering of shares, thereby obtaining the distribution rights of Maojian tea in the domestic online and overseas markets of Henan Xinyang Maojian Group, and changed its name to "Xinyang Maojian".

However, the main income of the renamed "Xinyang Maojian" still comes from heat supply, sales of calcium carbide, etc., and no income from tea sales was found in "other income".

It is worth noting that Xinyang Maojian stated in its 2020 financial report that, considering the future and financial performance of the Xinyang Maojian business division, it decided to terminate the operations of its tea division by exercising put options and selling Xinyang Maojian International Holdings Co., Ltd.

Xinyang Maojian became a hot topic again on February 16 this year, when an announcement was issued stating that the board of directors recommended changing the company's English name to China Guolong Moutai Co., Ltd.

As soon as the news came out, it was questioned as an attempt to ride on the popularity of Moutai. After all, Xinyang Maojian changed its name twice in more than two years. In March 2020, it even issued an announcement to change its name to "New China Economic Group Holdings Co., Ltd.", but it was later shelved.

Liu Kai, partner of Hangzhou Dongyuan Equity Investment, analyzed to the reporter of Blockchain Daily that companies like Xinyang Maojian, which have no relevant business, simply hype concepts and "take advantage" of hot traffic in order to increase their own popularity; in a mature capital market, the final effect may be counterproductive, of no benefit to the corporate image, and may even become a laughing stock.

According to third-party data, Xinyang Maojian, which was listed in 2001, had a pre-tax profit of HK$96 million in its first year, and maintained a positive growth trend in pre-tax profit from its listing to 2010. 2006 to 2009 was the company's highlight, with pre-tax profits of HK$203 million, HK$312 million, HK$244 million, and HK$298 million respectively in these four years, a maximum increase of 225% compared to the first year of listing. In these 10 years, the company's pre-tax profit totaled HK$1.732 billion, with no loss in any year.

Since 2011, the company's profitability has taken a sharp turn for the worse. After changing to Xinyang Maojian, the company's performance has not improved, and its losses are still expanding.

According to the financial reports released by Xinyang Maojian in the past four years, it lost HK$23.06 million in 2017, HK$41.97 million in 2018, HK$46.08 million in 2019, and HK$65.99 million in 2020. As of 2020, the company has suffered a pre-tax loss of HK$3.836 billion in the past 10 years, and a cumulative pre-tax profit loss of HK$2.1 billion since its listing.