After Didi probe, China to step up scrutiny of more firms listed overseas

China will step up supervision of Chinese firms listed offshore, its cabinet said on Tuesday, days after Beijing launched a cybersecurity investigation into ride-hailing giant Didi Global Inc on the heels of its U.S. stock market listing.

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

China will also check sources of funding for securities investment and control leverage ratios, it said.

China’s shift against companies listed overseas is a significant move in a sweeping clampdown on its massive and once-freewheeling online “platform economy”.

U.S. capital markets have been a lucrative source of funding for Chinese firms over the past decade but the risk of additional scrutiny may now deter domestic firms from listing there.

Earlier on Tuesday, Didi shares slumped as much as 25% in U.S. pre-market trade ahead of their first session since the Cyberspace Administration of China ordered the company’s app be removed from app stores in the country just days after its $4.4 billion listing on the New York Stock Exchange.

U.S.-listed Chinese companies including Full Truck Alliance and Kanzhun Ltd were also set to open lower on Tuesday after the CAC on Monday announced cybersecurity investigations into their affiliated businesses.

“Crackdown on Didi opens a new front in China’s tech assertiveness: this is now a question of sovereignty,” investment research provider TS Lombard’s China economist Rory Green wrote in a note.

“The battle for data sovereignty is beginning and China is already fully mobilized. It is increasingly clear that 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.”

In March, the U.S. securities regulator began a rollout of rules to exclude foreign companies from U.S. exchanges if they did not comply with U.S. auditing standards, a move aimed at removing Chinese firms from U.S. exchanges if they fail to comply with U.S. auditing standards for three straight years.

In May, Reuters reported that Beijing was pressing audio platform Ximalaya to drop U.S. listing plans and opt for Hong Kong instead, with one source at the time citing Beijing’s growing concerns that U.S. 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, including Didi, which started trading on June 30.

Several big U.S.-listed Chinese companies, however, including internet giants Alibaba and Baidu, have issued shares in Hong Kong in the past two years.

U.S. exchanges have long been popular listing venues for Chinese tech firms attracted by deep liquidity, high valuations, easier profitability rules and prestige.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.