China steps up supervision of overseas-listed firms after Didi IPO drama

Article content material

BEIJING — China will step up supervision of Chinese language companies listed offshore, its cupboard stated on Tuesday, days after Beijing launched a cybersecurity investigation into ride-hailing big Didi World Inc on the heels of its U.S. inventory market itemizing.

Beneath the brand new measures, China will enhance regulation of cross-border knowledge flows and safety, crack down on criminality within the securities market and punish fraudulent securities issuance, market manipulation and insider buying and selling, China’s cupboard stated in an announcement.

Article content material

China can even verify sources of funding for securities funding and management leverage ratios, it stated.

China’s shift in opposition to firms listed abroad is a major transfer in a sweeping clampdown on its huge and once-freewheeling on-line “platform financial system.”

U.S. capital markets have been a profitable supply of funding for Chinese language companies over the previous decade however the danger of extra scrutiny might now deter home companies from itemizing there.

Earlier on Tuesday, Didi shares slumped as a lot as 25% in U.S. pre-market commerce forward of their first session for the reason that Our on-line world Administration of China ordered the corporate’s app be faraway from app shops within the nation simply days after its $4.4 billion itemizing on the New York Inventory Trade.

Article content material

U.S.-listed Chinese language firms together with Full Truck Alliance and Kanzhun Ltd have been additionally set to open decrease on Tuesday after the CAC on Monday introduced cybersecurity investigations into their affiliated companies.

“Crackdown on Didi opens a brand new entrance in China’s tech assertiveness: that is now a query of sovereignty,” funding analysis supplier TS Lombard’s China economist Rory Inexperienced wrote in a notice.

“The battle for knowledge sovereignty is starting and China is already absolutely mobilized. It’s more and more clear that governments world wide have acknowledged the significance of information and the necessity to regulate the utility like non-public companies that management its manufacturing and move.”

In March, the U.S. securities regulator started a rollout of guidelines to exclude overseas firms from U.S. exchanges if they didn’t adjust to U.S. auditing requirements, a transfer geared toward eradicating Chinese language companies from U.S. exchanges in the event that they fail to adjust to U.S. auditing requirements for 3 straight years.

Article content material

In Could, Reuters reported that Beijing was urgent audio platform Ximalaya to drop U.S. itemizing plans and go for Hong Kong as an alternative, with one supply on the time citing Beijing’s rising considerations that U.S. regulators will probably acquire higher entry to audit paperwork of New York-listed Chinese language firms.

A document $12.5 billion, in 34 offers, has been raised up to now in 2021 from Chinese language companies itemizing in the USA, Refinitiv knowledge exhibits, together with Didi, which began buying and selling on June 30.

A number of large U.S.-listed Chinese language firms, nevertheless, together with web giants Alibaba and Baidu, have issued shares in Hong Kong up to now two years.

U.S. exchanges have lengthy been well-liked itemizing venues for Chinese language tech companies attracted by deep liquidity, excessive valuations, simpler profitability guidelines and status. (Reporting by Colin Qian, Judy Hua, Kevin Yao, Yilei Solar, Tony Munroe, Scott Murdoch and Aaron Saldanha; Modifying by Carmel Crimmins, Louise Heavens and Andrew Heavens)