We may be facing the inflection point between big Chinese tech and the US market – 08/07/2021 – Tatiana Prazeres

There was once a promising relationship between big Chinese tech and the US financial market.

The story went on for many years, in a mutually beneficial arrangement. Chinese companies go public in the United States and thus gain financial power to develop. US investors see good yield opportunities in these companies.

One of the iconic moments of the honeymoon was Alibaba’s IPO on the New York Stock Exchange in 2014, the largest IPO in history at the time, raising $ 25 billion. dollars.

Seven years later, we may be at the tipping point of this story, which had already been shaken by Ant Group’s hastily canceled IPO last year. The episode now concerns Didi, the Chinese application transport giant, which has just been listed on the stock exchange in the United States. It raised $ 4.4 billion – the largest IPO of a Chinese company in the United States since Alibaba.

Just days after the debut, Chinese authorities announced the opening of a cybersecurity and national security investigation against the company. Didi has been banned from adding new users to his platform. Your app is missing from the app stores. Consequence: Didi’s shares melted in the hands of American investors who had just acquired them.

Two other Chinese tech companies newly listed in the United States will also be investigated. More importantly, Beijing would revise the rules, in force since 1994, concerning the opening of the capital of Chinese companies abroad. Keep an eye out for tech companies.

It is nothing new that China is seeking greater control over companies in the sector. But what followed Didi’s IPO indicates something new. The movement reveals another perspective on the international performance of these companies and, in particular, on their presence in the American financial center.

With capitalization in the United States, Chinese companies are subject to American rules and jurisdiction. In addition, with more resources abroad, a Chinese-born company has more freedom to expand its investments outside of China, bypassing the usual strict surveillance and permits.

These consequences are not new. The times have changed. In this environment of growing tensions, Beijing has more interest in maintaining control. In addition, economic sanctions against China are increasing in the United States. It is difficult for the Chinese to accept that the country’s companies, because they are listed in New York, have to comply even with the anti-China laws of the Americans.

In this context, data protection is highlighted among Chinese concerns. Chinese high tech accumulates a fabulous amount of information, including the personal data of Chinese citizens.

The greater the foreign capitalization of Chinese companies, the less control Beijing has over them. In the case of big tech, which combines technology and data, the subject is particularly sensitive.

Of course, it is not just China that is worried about the presence of its companies on the American stock exchange. The United States does not like the idea that its financial market is fueling companies in the country seen as a strategic rival. From time to time, they threaten to exclude Chinese companies from the US stock exchange.

The Didi episode fuels the impetus in the United States for a closer examination of the performance of Chinese companies. Following logic, it will very soon be impossible for a company to comply with the legislation of one country without, at the same time, breaking the legislation of the other.

The symbiosis between major Chinese technologies and American investors is turning sour, despite the interest of the parties. Beijing and Washington change their minds. With the Didi episode, China made its contribution to something it always wanted to avoid: technological divorce.

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