About
Sinohedge is a UK-based strategic risk advisory dedicated to helping stakeholders identify, navigate and mitigate both organisational and investment risk exposure in their (in)direct dealings with China, the world’s number 2 economy, as well as China-aligned states.
Our mission is to help stakeholders engage (or disengage) ethically, diplomatically and profitably with the overall goal of insulating/immunising their businesses, investment portfolios and staff from concurrent and anticipated geopolitical (geoeconomic) friction. We seek to develop safeguards (“guardrails”) and policies for businesses seeking to navigate uncertainty.
Raison d’être
All investment bears return (yang 阳) and risk (yin 阴). You can’t have one without the other. How to address risk is a choice stakeholders must make.
For many stakeholders, China is still terra incognita. They recognise that it is the world’s second largest economy with 1/5 of the world’s population, yet they are also also increasingly wary of dealings with / dependence on its ‘one of a kind’ economic and political system, and
its alignment with other non-democratic states.
At Sinohedge, we believe that dealings with China at a minimum requires prudence, scrutiny and strategic planning, and that stakeholders should prepare a risk strategy. Stakeholders exposed to China must be clear-eyed and avoid making faulty assumptions (The saying goes yiye zhangmu, bu jian taishan 一叶账目, 不见泰山 ‘A single leaf clouding your vision and you won’t see Mt. Tai’), since trust in non-democratic countries cannot be taken for granted.
Chinese culture itself leans towards caution, prudence and risk-aversion rather than risk-taking and short-term profit maximisation: Cautionary expressions such as ‘The mantis stalks the cicada, oblivious to the oriole lurking behind’ (tanglang bu chan, huangque zai hou 螳螂捕蝉，黄雀在后), ‘rash pursuit of success, seeking quick profits’ (ji gong jin li 急功近利), and ‘incurring great losses over trifle gains’ (yin xiao shi da 因小失大) reflect the dangers of neglecting risk and coveting short-term gains.
In an increasingly volatile geopolitical climate, non-Chinese firms with exposure to China should adopt a longer-term strategy, worked at steadily little by little (细水长流 xishui changliu, 事缓则圆 shihuanzeyuan) showing due respect to Chinese people, language, culture, wisdom and even political thought (慎思笃行，防微杜渐 shensi duxing, fangwei dujian “Think carefully and act diligently, nipping issues in the bud”). Inaction, or failure to heed the risks from operating in a very different market could ultimately prove to be detrimental to your long-term financial goals . As a common expression from the Commentary of Zuo (4th century BC) exhorts: “In times of peace, prepare for danger; There’s no harm in preparation” (Juan siwei, youbei wuhuan 居安思危，有备无患).
As can be surmised from the above, risk strategy features prominently in Chinese culture and history: As early as the Zhou dynasty (1050–221 BCE) rulers used the Book of Changes, China’s earliest classical text, to divine and interpret changes (“fortunes”) in everything from weather to financial providence using its hexagrams (gua 卦) in conjunction with the Lunar calendar and sexagenary monthly cycle. Zhuge Liang (181-234), the legendary strategist of the Shu kingdom, supposedly used a variant of these hexagrams (qimen dunjia 奇门遁甲) to develop strategies in fighting off the armies of Cao Cao of Wei. In the subsequent period, the Seven Sages (‘Mystics’) of the Bamboo Grove zhulin qixian 竹林七贤) amalgamated concepts from the Book of Changes with Confucian and Daoist philosophy.
Service areas: Coming Soon
Advisory
Sino Guv’nor: Governance Risk
“Culture eats strategy for breakfast”, the saying goes. Culture determines which workplace behaviours are rewarded (honest behaviour) and which are frowned upon (corrupt, fraudulent or deceptive behaviour). It determines ideology (yishi xingtai 意识形态), values and ethics; It determines the norms of interaction (i.e. open and collaborative or closed and siloed); We advise China-exposed company stakeholders about the party-state’s unique language, culture and norms, and the implications for your firm’s corporate governance.
Capital Markets: Investment & Brokerage
We help investors quantify and mitigate their portfolio exposure to investment and to geoeconomic risks e.g. delistings, boycotts etc. We also advise them on their cross-border investment activity, connecting them with trusted local brokerages and regulators, as well as delivering recourse for them in cases of misconduct.
Capital Markets: Private Markets
We help PE investors (LPs) and their general partners to quantify and mitigate their portfolio exposure to investment and geoeconomic risks.
We also help those seeking to offload non-performing subsidiary businesses to estimate asset value(s) and locate potential local buyer(s).
Communications assistance for firms and fund managers looking to invest in China, engage in constructive talks or establish joint ventures with Chinese firms. This also includes reputational risk management.
Public Relations
Data
Company Exposure & Supply Chain Resilience Scores
We provide quarterly company risk exposure scores based on company funding, company sector, index membership, owner transparency and alternative data.
Public Relations
Research
Geoeconomic Risk: Three Burrows
Strategic equity and credit research for Chinese or China-exposed businesses and counterparts. We also provide strategic sector reports (e.g. real estate, energy, communication services, utilities, aerospace, defence, education, finance, tech, life sciences) on demand.
Taipan Trust
Sinohedge conducts due diligence on company board members and fund managers of China-exposed businesses, helping stakeholders evaluate an investment’s suitability based on the fiduciary or owner’s vested interests (既得利益), their candour in media interviews, known connections, foreign agent registration data & portfolio company selection.
Insurance Brokerage
Sinoprudence: Insurance Brokerage
We introduce stakeholders to firms that take on risk exposures. This includes credit insurance for exports, cover for cyber attacks, wars, coups, government expropriations and similar misfortunes.
Legal
Due Diligence
We arrange due diligence checks on China-based JV partners and help hold these partners accountable for various types of corporate risk exposure.
Cyber
Cybersecurity & Cloud Data Risk
We aid China-exposed stakeholders in limiting company exposure to public/private cloud solutions provision as well as safeguarding company IP, employee data and operating systems from external hacking. This includes risk to the company from employees exposure to social media platforms.
Politics
Political Exposure: Donor Provenance and Lobby Groups
We quantify government exposure by scrutinising the source of politicians’ funding for campaigns, donations as well as the financing of corporate lobby groups or other political consultancies that arrange policy roundtables.
Media
Ad Revenue & Editorial Independence
China-exposed media firms’ journalists and editorial independence can be compromised by their owners’ vested political and commercial interests. For instance, omitting relevant critical content or propagating third party narratives. They also face risks in becoming dependent on ad revenue from non-aligned states which could compromise their editorial independence. We seek to guide relevant organisations on managing associated risks.
Lawfare & Litigation Exposure
Media firms can become susceptible to libel, defamatioon or SLAPP actions against legitimate public interest investigations and reporting.
Other firms must plan for potential Mainland litigation arising company from company products, services, actions, or other events by plaintiffs.
Beijing Bankroller: Dependency Identifier & Funds Provenance
Unsure how your business or another’s business is economically exposed to China? We help businesses better understand their exposure based on the provenance of their funding from stakeholders such as investors, customers and employees. We help quantify these dependencies and offer advice on how to deal with them.
Geoeconomic Risk: Three Burrows
We help China-exposed stakeholders to plan for adverse business/downside geopolitical or geostrategic risk outcomes, helping them to diversify i.e. avoid risk concentration and ensure business continuity.
National Security & Strategic Sectors
Spendthrift governments may be restricted as creditors from adversarial states wield excessive leverage over their debt markets. Such actors may also invest heavy industry, energy, utilities, infrastructure, financial services and higher education sectors, constraining their ability to employ a national security strategy. We provide contingency plans for geopolitical scenarios and stress-test political risk models to help organisations navigate geopolitical risks.
Regulatory Risk & Compliance
Firms operating in China face an increasingly unpredictable and often seemingly arbitrary regulatory environment. We help compliance staff communicate with local regulatory bodies and seek to prevent them from violating new local regulations.
Whistleblowers & Critics
Companies that brook no dissent are usually unsuccessful in the long-run. We advise China-exposed companies on the protective infrastructure they can provide for employees, their families and other “non-aligned” stakeholders, who may be at risk of intimidation, coercion or in some cases, repression/trauma. Critics can be met with derision, denial, downplaying, soft incentives and other tactics, often by paid actors and interested parties.
Investigative Audits & ESG Disclosure
Investigative financial audits to protect against management financial window-dressing, credit control lapses and NPL under-provisioning. We also provide ESG disclosure for assurance against ‘greenwashing’ (firms embellishing or misrepresenting their green credentials)
Advisory
Network Compromise/
Astroturfing Risk
We help companies and other institutions improve their ability to recognise “old friends of the Chinese people”: i.e. regime accomplices, ventriloquists and apologists. Safeguarding against such “astroturfing” and network manipulation can help avoid corruption, IP theft, sabotage or economic coercion by individuals.
Audit
Competitive Risk
Sinohedge provides firms with market intelligence on local competitors and on methods they can employ to ‘build moats’ so as to avoid market share encroachment from state-subsidised competitors and dumping risk.
Education, Business Schools & Economists
Overreliance on international student funding can compromise a university or school’s stated values. We seek to inform boards about the risks and recommend policies they can adopt to avoid such outcomes.
Tech Risk
For stakeholders implementing AI within their firms, China will have specific requirements for implementation within the Mainland Chinese subsidiary. We advise firms wishing to navigate AI risks in China.
Red Flags
We provide short selling research firms additional input in unmasking deceptive, misleading and fraudulent reporting practices by local firms.
IP Portfolio Protection
We seek to guard against IP infringements through collaboration with bodies such as the China National Intellectual Property Administration (CNIPA).
Indirect Exposure
Firms may be indirectly exposed to China through economic trading relationships with entities or individuals from China-dependent third-party countries. We seek to help them quantify and mitigate such indirect exposure.
Energy Transition Risk
The transition away from fossil fuels to clean energy for many firms implies increased supply chain dependence on rare earths mining, processing and finished products. We seek to identify and help clients manage associated risks.
Capital Markets:
Marketplace Integrity Risk
We provide assessments for members or stakeholders of marketplaces (exchanges, trading platforms) about risks pertaining to undue influence (e.g. state ownership, funding) from state-directed actors on securities trading venues in capital markets.
Civic Institutions Risk
Activists funded by hostile foreign interests may impact religious institutions, labour unions, voluntary associations, charities, NGOs and local government authorities, putting pluralism and public life at risk. Other institutions, such as philanthropic organisations, may also come under undue influence through wealthy donors.
Social Capital
We advise stakeholders on methods to measure social capital (trust) in the workplace utilising questionnaire surveys, interviews, focus groups, and personal stories. We also advise them on methods they can employ to improve.
Hext
Hext (hedge exposure to tariffs) offers corporate customers strategies to counter retaliatory tariffs and other trade barriers, planning contingencies in an uncertain geopolitical environment.
Social Responsibility
Investment activities are not amoral. Investors must ensure their investments are not put to nefarious use, and organisations must ensure that their financial sponsors are legitimate so as to avoid laundering ill-gotten proceeds. We help investigate money flows for China-exposed businesses.
Development Finance Projects
We advise recipients of state-backed development finance on project feasibility and provide risk mitigation strategies.
Clients
Email william@sinohedge.co.uk for our advisory service sheet.
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Three Burrows Research
Adopting a strategy for risk is reflected in the expression “A wily hare has three burrows” (狡兔三窟 jiaotu sanku). It means that people should always have more than one secret hideout or strategic vantage point to ensure safety.
It alludes to a historical record about Chancellor Mengchang of Qi (d. 279 BC) and his retainer, Feng Xuan in The Annals of the Warring States (475-220 BC).
Feng Xuan helped dig three such “burrows” to ensure the Chancellor’s safety from the Qi ruler: (i) Earning his vassals’ support by cancelling their debts (ii) Winning him prestige in courting meetings with another ruler, the king of Wei (iii) Securing the construction of an ancestral temple by playing on the Qi king’s fear that the Chancellor might defect.
Just as a wily hare should have three burrows for its warren, so investors should seek to protect their investment risk exposure to China. Hence “Three Burrows Research” seeks to identify, quantify and mitigate risks/dependencies for China-exposed companies.
About
Sinohedge is owned by William Hext, the company’s founder.
I am a British financial services professional with nearly two decades of experience working with China-based companies including so-called buyside and sellside financial institutions in London, Hong Kong, Beijing, and Zurich. I am fluent in Mandarin Chinese, having obtained a First Class masters degree from Edinburgh University in Chinese Studies.
I started the company in 2024, bemused by the dissonance between the West’s conversation about China, and China’s conversation about the West.