Chinese firms are more enthusiastic than most about listing on US stock exchanges. Currently, 250 of them, including companies that are registered in Hong Kong or offshore centres but derive most of their revenue and profits from mainland China, trade on US equity markets. But a recent flurry of official measures in both China and the US suggests that the two governments are not keen on Chinese firms retaining their US listings. If push comes to shove, how would delisting hurt either country?
The latest controversy concerns the dominant Chinese ride-hailing platform Didi Global (partly owned by Uber), which on June 30 raised US$4.4 billion ($6 billion) in a successful IPO on the NYSE. Within 48 hours, the Cyberspace Administration of China (CAC), citing a suspected data-security breach, announced that it would restrict the company’s ability to sign up new users. The CAC then ordered the removal of Didi from all domestic Chinese app stores, and the State Administration of Market Regulation, the country’s antitrust authority, fined the firm for not obtaining prior approval for earlier mergers and acquisitions.
The penalties imposed on Didi — widely interpreted as a warning to other Chinese companies against listing in the US without government approval — partly reflect three concerns among Chinese policymakers. The authorities are worried that sensitive digital data, including the location of (and traffic flows around) important addresses in China, may fall into the hands of the US intelligence or defense communities. They also do not want Chinese technology firms to become too large and powerful, and fear that Big Tech companies’ forays into financial markets may undermine financial stability.