Beijing assures Chinese firms it remains ‘open' and ‘supportive' of public listing overseas

public listing, Xinhua News Agency, China Securities Regulatory Commission, suggesting that the rout was overdone, Didi Chuxing, US IPO, banned new downloads of the app

Beijing has assured Chinese companies that the government remains open to and supportive of public listing overseas, according to a commentary by the official Xinhua News Agency on Wednesday, as authorities move to ease fears of rattled investors amid a broad crackdown on the country’s technology sector.

“Some recent regulatory policy changes are related to overseas listing,” read the commentary, which acknowledged concerns in the market about uncertainties in China’s position on such public offerings.

It cited a speech delivered in June by China Securities Regulatory Commission (CSRC) chairman Yi Huiman, who said the country’s securities body is open to initiatives by Chinese companies to list overseas.

The CSRC “supports enterprises to make their own choices in view of their own circumstances and to use the resources available in [both domestic and foreign] markets in a law-abiding manner”, the Xinhua commentary said.

It marks the latest sign that Chinese authorities have become uncomfortable with a sell-off that sent the country’s key stock indexes to the brink of a bear market on Wednesday morning. State-run media has published a series of articles suggesting that the rout was overdone.

public listing, Xinhua News Agency, China Securities Regulatory Commission, suggesting that the rout was overdone, Didi Chuxing, US IPO, banned new downloads of the app

Didi Chuxing, operator of China’s dominant ride-hailing app, has been put under the country’s first-ever cybersecurity review after raising US$4.4 billion from its public listing in New York. Photo: EPA-EFE

It also ratchets up Beijing’s effort to clear up plans to tighten procedures on Chinese firms going public overseas.

China’s process for approving initial public offerings (IPOs) in foreign capital markets will require an additional layer of oversight, as the cyberspace regulator is being formally inserted into the procedures, according to draft rules proposed by the Cyberspace Administration of China (CAC) earlier this month.

That proposed cybersecurity review will result in additional transaction costs for Chinese firms looking to tap foreign capital markets, according to Angela Zhang, director of the Centre for Chinese Law at the University of Hong Kong.

The Xinhua commentary, however, did not directly refer to the recent debacle surrounding ride-hailing giant Didi Chuxing’s US IPO. The CAC had asked Didi to review its network security, but Didi pushed ahead with its listing on June 30 without doing so – only to have US$29 billion, or 43 per cent, of its market value wiped out in less than a month after Beijing banned new downloads of the app.

That prompted Beijing to put Didi under the country’s first-ever cybersecurity review, led by a task force of seven Chinese agencies including CAC, the Ministry of Public Security and the Ministry of National Security.

Hong Kong University’s Zhang indicated that various government agencies have been sending mixed signals about the direction of overseas listings. “Power is fragmented within the bureaucracy and different departments are citing their own objectives and missions,” she said.

CSRC, for instance, is neither among the agencies that are officially part of China’s cybersecurity review nor is it involved in Didi’s investigation. CSRC chairman Yi’s speech, that was cited by the Xinhua commentary, was delivered before the CAC announced its investigation of Didi in early July.

That commentary, according to law professor Henry Gao, reassures companies that there will be no significant change in policy. “Chinese laws will continue to apply to these firms, including the crackdowns,” said Gao, who teaches trade law at Singapore Management University.

Dozens of Chinese companies are currently evaluating whether to proceed with plans to list in the US after China announced the data security reviews and recent crackdowns on the country’s technology sector.

In the first six months of this year, there were 37 Chinese firms listed in the US, where they raised a combined US$13.8 billion – more than all of 2020.

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