NEW YORK/SHANGHAI — In plans released Tuesday after authorities initiated investigations into U.S.-listed tech brands such as Didi Global, Beijing will increase control of Chinese companies on global markets and future listings, citing concerns about information security. China’s State Council cabinet and the Communist Party’s General Office announced in a joint view posted via Xinhua News Agency that they want to crack down on unlawful behavior in the stock market. According to them, Beijing will implement legislation and norms governing cross-border data transfers and sensitive information management. Despite the fact that no details of the measures have been released, the government’s stricter stance is likely to impact Chinese companies considering foreign IPOs. Increased scrutiny of international listings may deter corporations like Alibaba Group Holding from taking use of foreign markets’ larger fundraising possibilities. The investigations target three technology businesses — including leading Chinese ride-hailer Didi — that listed in the U.S. last month. The Chinese Cyberspace Administration blocked app retailers from selling Didi’s app on Sunday, accusing the business of unlawful data harvesting. For a long time, investors have been concerned about the likelihood of tighter regulatory frameworks for Chinese companies in both the United States and China. In 2009, China enacted restrictions requiring companies listed outside of the country to safeguard state secrets. More recently, the Securities and Exchange Commission has been developing new listing guidelines in response to laws approved last year prohibiting trading of shares in Chinese companies that refuse to let regulators to inspect their audits for three years. American demands to inspect the work of Chinese auditors have been turned down by Beijing. Tensions between the world’s two largest economies have so far done little to stop Chinese companies from seeking capital in American markets, which has been welcomed by risk-averse investors who have lifted stock prices to new highs. According to Dealogic, 36 Chinese companies have undertaken IPOs in the United States this year, raising a total of $12.5 billion, the quickest pace since 1995. “Companies that are currently listed will not be delisted immediately once the SEC proposes new laws — there will be transitional procedures,” said a Hong Kong lawyer who works with Chinese corporations. According to the lawyer, many companies would rather chase financial opportunities now rather than risk being delisted in the future. New regulations, on the other hand, threaten to drive a gap between the Chinese and international capital markets. Some Chinese firms that are publicly traded in the United States have begun to list on the Hong Kong Stock Exchange or opt for dual listings, a trend that is expected to continue. The Communist Party-backed Global Times highlighted alarm over data leaks at overseas-listed corporations in an editorial this week. “For companies like Didi, which have been listed on the New York Stock Exchange and have foreign companies as their largest and second-largest shareholders,” the editorial said, “China should more strictly supervise their information security to protect both personal data security and national security.”/n
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