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According to a researcher from the Center for Strategic and International Studies, Beijing’s assault on technology businesses is “backfiring” on China, as US politicians ask for monitoring on Chinese enterprises seeking to list in the United States. Following China’s crackdown on ride-hailing firm Didi this weekend, concerns about regulatory surveillance of Chinese internet businesses have risen once more. Authorities demanded that the Didi app be removed from app stores only days after the Chinese company’s IPO in the United States. Didi was accused by Chinese regulators of improperly collecting personal data from its consumers. Since then, China has launched a cybersecurity investigation into three more Chinese companies that are publicly traded in the United States. According to Jude Blanchette, the Freeman Chair in China Studies at the center, Beijing is maintaining a “delicate line” of managing its tech behemoths while also ensuring that they can continue to list overseas. “It’s already backfiring,” he said on CNBC’s “Squawk Box Asia” on Thursday, referring to Beijing’s measures, particularly over the weekend, which are “leading to lawmakers here in the United States intensifying their requests for tighter regulation over Chinese businesses listing in the United States.” Beijing is attempting to strike a fine balance between bringing these companies to heel with regulatory steps while also allowing them to selectively IPO overseas. Blanchette, Jude CSIS’s Freeman Chair in China Studies In a statement released Wednesday, Republican Senator Marco Rubio said it was “reckless and irresponsible” to allow Didi, a “unaccountable Chinese firm,” to sell shares on the New York Stock Exchange. Didi shares in New York have dropped nearly 28% since China’s crackdown over the weekend. “To put it bluntly, if the United States starts rejecting IPOs here, the Hong Kong market, Star market, and Shanghai can’t fill up the slack in terms of IPO pipeline,” Blanchette said. “So Beijing is treading a fine line here, attempting to bring these companies to heel with regulatory steps while yet allowing them to selectively IPO offshore.” But, according to Qi Wang, CEO of Hong Kong-based MegaTrust Investment, this isn’t necessarily a crackdown “or some other form of repression. ” He told CNBC on Thursday that China still “very much” wants these firms to prosper, and that what’s occurring today is “truly a normalization of the internet environment.” “To put things in perspective, remember that the Chinese internet space was previously entirely uncontrolled, and the government has only just begun to implement oversight,” he said. “We’re moving from almost little regulation to increasing regulation on the internet. Of However, because of the low base, the pressure may appear to be excessive throughout this transition.” According to Renaissance Capital data, 30 China-based IPOs in the United States raised the most capital since 2014. According to the New York Stock Exchange, roughly 60 Chinese companies were still planning to go public in the United States this year as of late April. China has often required to use firms as examples to drive this idea home throughout the last 30 years of opening up the country: There is a “large degree of latitude” for business and profit, but Blanchette says that one must be mindful of where the political lines are drawn. He explained, “The expression is, ‘Kill the chicken to terrify the monkey.'” “With the corporations that have recently come under examination, there is a political’sin’ that the company has transgressed,’ from Beijing’s standpoint.” While there is a regulatory justification to be made for Beijing’s increased inspection of these enterprises, it is inextricably linked to the political case. The speech given by Alibaba founder Jack Ma last year, according to CSIS’s Freeman Chair in China StudiesBlanchette, was the “proximate reason that triggered all of this.” Last October, Ma gave a lecture in Shanghai, criticizing China’s regulatory framework for stifling innovation. Following that speech, he retreated from the public eye for a period of time, and an IPO of Alibaba’s financial unit, Ant Group, was put on hold. “While there is a regulatory case to be made for Beijing’s increased inspection of these enterprises, it is inextricably linked to the political rationale,” Blanchette noted. All of this regulatory attention, Blanchette cautioned, “is not going away.” “This is the permanent reality, I believe, of a newly energized regulatory apparatus in Beijing, which sees the degree of domestic market power these internet giants have obtained as unacceptable,” he said. — Evelyn Cheng of CNBC contributed to this article./nRead More

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