BEIJING: China’s cabinet announced on Tuesday (July 6) that it will increase oversight of Chinese companies listed abroad, days after Beijing opened a cybersecurity inquiry into ride-hailing giant Didi Global Inc following its NASDAQ listing. According to a statement from China’s cabinet, the new measures will tighten regulation of cross-border data flows and security, crack down on illicit conduct in the securities market, and punish fraudulent securities issuance, market manipulation, and insider trading.
China would also monitor funding sources for securities investments and leverage levels, according to the statement.
The move comes as China tightens its grip on its once-liberal internet “platform economy,” which has been subjected to antitrust investigations and penalties, as well as heightened scrutiny of data security and privacy, and as US-China tensions have stretched to financial markets.
READ: Didi’s launch in the United States is overshadowed by a Chinese cybersecurity inquiry
Didi shares fell as much as 25% in pre-market trading in the United States on Tuesday, ahead of their first session since China’s Cyberspace Administration ordered the company’s app to be banned from app stores in the country just days after its US$4.4 billion IPO on the New York Stock Exchange.
After the CAC launched cybersecurity probes into their affiliated businesses on Monday, US-listed Chinese companies such as Full Truck Alliance and Kanzhun Ltd were also scheduled to open lower on Tuesday.
In March, the US Securities and Exchange Commission began rolling out rules that would bar foreign businesses from trading on US markets if they did not meet US auditing standards for three years in a row, a step intended at barring Chinese companies from trading on US exchanges.
READ: Didi claims it was unaware of a Chinese regulator inquiry prior to its IPO.
In May, Reuters reported that Beijing was pressuring audio platform Ximalaya to abandon plans for a US offering and instead list in Hong Kong, citing Beijing’s rising concerns that US regulators could obtain more access to audit papers of Chinese companies listed on the New York Stock Exchange.
Refinitiv data shows that Chinese corporations listed in the United States have raised a total of US$12.5 billion in 34 offerings so far in 2021, excluding Didi, which began trading on June 30.
However, some large Chinese businesses with US listings, such as Alibaba and Baidu, have issued shares in Hong Kong in the last two years.
Deep liquidity, lofty valuations, softer profitability rules – and reputation – have long lured Chinese tech businesses to float on US exchanges./n
