Coronavirus

Tech Company Tied to China Cashes in on Small Business Relief

Ideanomics saw stock price soar as it received hundreds of thousands in PPP loans

Ideanomics chairman Bruno Wu / Getty Images

A corporation with close ties to the Chinese government received hundreds of thousands of taxpayer dollars in pandemic relief money as small businesses struggled to access the fund.

Ideanomics, a U.S.-based tech company founded by Chinese billionaire Bruno Wu, was valued at more than $50 million based in part on its collaboration with Chinese provincial governments and state-owned enterprises dating back to its 2017 founding. The company, which specializes in financial technology and electric cars, collected $400,000 in forgivable loans from the taxpayer-funded Paycheck Protection Program (PPP) designed to aid small businesses hurt by the coronavirus, according to Securities and Exchange Commission filings.

But even as it chased taxpayer loans, Ideanomics reassured investors that the coronavirus posed little threat to its financial well-being, noting that its cash and cash equivalents had doubled between December 2019 and March 2020 as the deadly virus spread worldwide.

The company, which controls several Chinese corporations through its web of subsidiaries, has partnered with the Chinese government to facilitate its state-backed infrastructure projects. A Chinese provincial government is slated to invest in Ideanomics's Malaysian subsidiary to support Beijing's efforts to gain influence in Southeast Asia, according to its 2019 annual report to the SEC.

Ideanomics is one of several multimillion-dollar multinational corporations that benefited from PPP, which was created to support small businesses affected by the shutdowns caused by the pandemic. While the program was supposed to benefit businesses that would have laid off employees struggling during the economic shutdown, large corporations have sparked criticism by applying for and receiving millions in taxpayer dollars.

It is unclear whether Ideanomics has returned its PPP loans, and the company did not respond to a request for comment.

Rep. Guy Reschenthaler (R., Pa.), a member of the congressional China Task Force, said that the PPP money should not be provided to China-linked firms such as Ideanomics and has referred the matter to the Department of the Treasury and the Small Business Administration.

"Given the popularity of this program, we must ensure dollars are reserved for American small businesses, the backbone of our national economy," Reschenthaler told the Washington Free Beacon. "Companies with ties to the Chinese Communist Party should not receive taxpayer-funded assistance programs."

The publicly traded company has surged on the NASDAQ since the small business relief fund was passed. Share prices, which plummeted to $0.30 on March 6, the lowest point in company history, have since rebounded to $2.05 per share as of Thursday.

The company acknowledged that the coronavirus posed little threat to its financial well-being, stating in a March SEC filing that it "does not anticipate that the COVID 19 pandemic will adversely affect its ability to raise funds in the near-term." It's cash and cash equivalents on hand actually grew between December 2019 and March 2020, from $2.6 million to $5.9 million.

More than 210 public companies have benefited from the program. But Ideanomics has uniquely strong business ties with the Chinese government and government entities that are not seen in its peers, according to its filings. "[Ideanomics] does have joint ventures, partnerships and agreements with the State Own [sic] Entities (SOE) described above," the company wrote in its 2019 report.

Despite the company's claim that it "does not contract directly with the government of the PRC," its SEC disclosures show that the Chinese government is slated to invest in the company. In its 2019 report, the company revealed that China's Yunnan province, "in its capacity as the PRC's province responsible for China's Belt and Road initiative in the ASEAN countries," will invest in Ideanomics's Malaysia-based subsidiary that specializes in electric vehicles. The multibillion-dollar government initiative seeks to erect China-built infrastructures across the developing world in a bid to improve China's global prestige and influence.

Ideanomics has also partnered with several state-owned enterprises with strong ties to the Chinese government. The company, for example, is in the process of hashing out a business deal with PetroChina, the largest oil and gas producer in Asia. Ideanomics will earn a commission every time someone charges their electric vehicle at company charging stations in Nanjing. PetroChina, ostensibly a private company, is actually the publicly listed arm of the state-owned China National Petroleum Corporation. Ideanomics also has agreements with state-owned car companies, such as JAC Motors and Foton Motor, to purchase electric vehicles at preferential prices.

The company has also worked with "associations" in China, many of which act as the civil society arm of the Chinese government. The company entered into a "strategic partnership" in August 2019 with the China Tourism Automobile and Cruise Association, a government-organized entity controlled by the regime's Ministry of Culture and Tourism. Under the terms of the partnership, Ideanomics will help bus operators convert the association's fleet to electric vehicles—a mandate that will take effect in 2022.

While the company took a beating during the recession that emerged with the pandemic, Ideanomics intends to capitalize on China's multitrillion-dollar "new infrastructure" initiative that seeks to kickstart the domestic economy. The company unveiled two subsidiaries in March that will help the government secure financing for its massive infrastructure investments, including new 5G networks, Belt and Road Initiative projects, and electric vehicles.

"Ideanomics and its partners are positioned to benefit from many of these New Infrastructure economic initiatives in China, all of which will see a boost designed to propel the country forward," the company said in an April press release.

Neither the Small Business Administration nor the Treasury Department, both of which administer the PPP program, responded to requests for comment.