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China Tech Crackdown Intensifies With Tighter Supervision of Foreign-Listed Firms

A trader works during the IPO for Chinese ride-hailing company Didi Global on the New York Stock Exchange on June 30, 2021. Photo: Reuters.

China’s mobilizing to ensure data held by giant tech companies doesn’t fall into foreign hands.  The latest measures to tighten regulation of offshore listings come just days after Beijing suspended new downloads of the popular Didi Chuxing ride-hailing app.


(AF) China’s stepping up supervision of Chinese firms listed offshore, opening a new front in its campaign to rein in its high-flying tech companies.

Under the new measures, officials will improve regulation of cross-border data flows and security, crackdown on illegal activity in the securities market, and punish fraudulent securities issuance, market manipulation and insider trading, China’s cabinet said in a statement on Wednesday.

The measures to tighten controls on tech companies listing overseas are the latest development in a sweeping clampdown on China’s massive and once-freewheeling online economy. It comes just days after Beijing suspended the downloads of the popular Didi Chuxing ride-hailing app, citing concerns over national security and data security.

“This is now a question of sovereignty,” said Rory Green, TS Lombard’s China economist. “The battle for data sovereignty is beginning and China is already fully mobilized.’’

US capital markets have been a lucrative source of funding for Chinese firms over the past decade but the risk of additional scrutiny may hit long-term valuations and deter domestic firms from listing there.

“It certainly won’t help Chinese companies seeking to list in the US,’’ said Duncan Clark, the author of “Alibaba: The House that Jack Built” and head of investment consultancy BDA China in Beijing. ‘’It doesn’t mean that the road to New York is blocked but that there are more gatekeepers to get on the road.”

Data security concerns

In May, Reuters reported that Beijing was pressing audio platform Ximalaya to drop US listing plans and opt for Hong Kong instead, with one source at the time citing Beijing’s growing concerns that US regulators will potentially gain greater access to audit documents of New York-listed Chinese companies.

A record $12.5 billion, in 34 deals, has been raised so far in 2021 from Chinese firms listing in the United States, Refinitiv data shows. That includes Didi, which started trading on June 30 after its bumped $4.4 billion IPO.

The cabinet statement said regulations on Chinese companies listing overseas will be amended, the responsibilities of regulators better clarified and their collaboration strengthened.

China’s cyberspace watchdog widened its crackdown on tech companies on Monday, announcing investigations into apps run by two more foreign-listed companies, Kanzhun Ltd and Full Truck Alliance Co.

The crackdowns open a new front in China’s tech assertiveness, said TS Lombard’s Green. “Governments around the world have recognized the importance of data and the need to regulate the utility-like private firms that control its production and flow,” he said.



Chart of the Day: Didi Crackdown Bodes Ill for its US-listed Compatriots


Iris Hong

Iris Hong is a senior reporter for the China desk, and has special interests in fintech, e-commerce, AI, and electric vehicles. She began her career in 2006 and worked for Interfax News Agency and for PayPal before joining Asia Financial in July 2020. You can reach out to Iris on Twitter at @Iris23360981


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