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President Xi Jinping is finally focusing on what his administration has long seen as a disgusting national security risk and a blatant weakness in Chinese capital markets: its inability to attract the country’s best technology companies, who instead have gone to New York to raise capital.
This steady flow of business and prestige for American scholarships is over. Having spent most of his second term focusing on perceived national security risks in Xinjiang, Hong Kong and the national of China financial sector, Xi turns his attention to the technology champions on the country’s New York list and to the data that drives his business.
The apparent trigger for this new campaign was Didi Chuxing’s move to move forward with an initial US $ 4.4 billion public offering on the eve of the celebrations. centenarian of the founding of the Chinese Communist Party. Despite this, the travel company did concerns at home, U.S. regulators could access their customer data.
In response, China’s Cyberspace Administration, the country’s Internet regulator, ordered Didi on July 2 to stop recruiting new users pending a review of its data security practices. When US trading on the company’s recently listed shares resumed on Tuesday, they fell 20 percent.
In order not to lose the message, on Tuesday night, the Chinese government’s State Council and the party’s Central Committee issued rare joint guidelines that will lead to much greater oversight of IPOs abroad. As a result, Chen Long told Plenum, a Beijing-based consultancy, the CAC “could become the de facto highest authority to approve [tech] OPC ”.
While detailed procedures and requirements have yet to be explained, it is clear that the previous freedom of Chinese technology advocates to list actions abroad has been revoked when and where they deemed it appropriate. The new policy is also consistent with Beijing’s “growing emphasis on self-sufficiency and more inward policies,” said Eswar Prasad, a Chinese finance expert at Cornell University.
One of Didi’s first investors, who was lucky enough to sell his shares before the probe was released, noted that the regulations were intentionally vague. “China can justify anything in the name of national security, just as the US does,” the investor said. “Xi has made it very clear that he does not want major Chinese companies to go public in the United States.”
The irony is that many of Washington’s most important Chinese hawks, such as Florida Senator Marco Rubio, also don’t want major Chinese companies to go public in the U.S.
In addition to Didi, which has more than 490 million users, Chinese technology champions listed in the United States include Sina Weibo, which operates China’s Twitter equivalent, and e-commerce giant Alibaba. The latter was a New York-listed company for five years before completing a secondary listing in Hong Kong in 2019. Imagine the reaction of Washington’s Chinese hawks if Twitter and Amazon are only listed in Shanghai.
Washington’s top Chinese critics shouldn’t want what Xi wants, and vice versa. If Xi is right that New York ads, like Alibaba, Weibo, and Didi, are bad for China, they’re probably in balance for the United States. But on Tuesday, Rubio told the Financial Times that allowing Didi to appear in New York had been “reckless and irresponsible”.
Rubio and many others on Capitol Hill oppose the fact that so far Chinese companies have been able to evade American audits, as Beijing does not allow them to open their books to accountants abroad.
The Xi administration is concerned that this may change. Legislation signed by Donald Trump during his last year in office may require the withdrawal of any company that does not accept audits by the Accounting Oversight Committee of Washington-based public companies for three years.
Xi and Rubio probably agree that three years is too long. Thanks to Didi’s debacle, they can both get what they want long before.
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