The US listing frenzy for Chinese companies worth US$2 trillion (HK$15.6 trillion) appears to have stopped in its tracks as Beijing is tightening cybersecurity regulations.
Beijing’s July 10 announcement that almost all businesses trying to go public in another country will require approval from a newly empowered cybersecurity regulator amounts to a death knell for Chinese initial public offerings in the United States, say industry watchers.
“It’s unlikely there will be any US-listed Chinese companies in five to 10 years, other than perhaps a few big ones with secondary listings,” said Paul Gillis, a professor at Peking University’s Guanghua School of Management in Beijing.
The clampdown, triggered by Didi Global’s decision to push ahead with a New York listing despite objections from regulators, is already sending shockwaves through markets. A gauge of US-traded Chinese stocks has dropped 30 percent from its recent high.
Daojia, a Chinese home service platform, is pausing its US initial public offering plans that could raise US$500 million as China stepped up scrutiny on overseas listings and cybersecurity, Bloomberg reported yesterday, citing a person familiar with the matter.
The startup would join Chinese social media and e-commerce platform Xiaohongshu, or known as Little Red Book, in setting its going-public ambitions aside.
China’s regulatory crackdown on its technology sector and US consumers possibly saving more than they spend are twin risks facing the world’s economic recovery, says Ruchir Sharma, head of emerging markets and chief global strategist at Morgan Stanley Investment Management.