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    Explained: Why is China going after homegrown companies eyeing public listing abroad?

    Explained: Why is China going after homegrown companies eyeing public listing abroad?

    Explained: Why is China going after homegrown companies eyeing public listing abroad?
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    By CNBCTV18.COM IST (Updated)

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    China said Tuesday that it would tighten rules for homegrown companies listed overseas or seeking to sell shares abroad.

    China has said that it would tighten rules for homegrown companies listed overseas or seeking to sell shares abroad. The move is being seen as an attempt to prevent Chinese firms from raising money in the US.

    The statement has caught global attention as it comes after China's recent crackdown on the country's biggest taxi service DiDi Chuxing.

    Punishing DiDi for public listing in New York?

    Citing a 'breach' of public data, the Cyberspace Administration of China (CAC) banned DiDi Chuxing and got it removed from app stores. According to CAC, DiDi indulged in wrongful collection and usage of customer data. So far, it has not been disclosed if a penalty would be levied on the cab service app or not.

    The move came days after the company got itself listed on the New York Stock Exchange. On June 30, DiDi rolled out its initial public offering worth $68 billion. This was the second-biggest public listing in the US by a Chinese company, after Alibaba Group Holding Limited. Soon after, the application raised $4.4 billion from the market.

    According to Refinitiv (an American-British company) data, a record $12.5 billion, in 34 deals, has been raised so far in 2021 from Chinese firms listing in the United States.

    Another chapter in US-China hostility

    Beijing's new strategy on firms eyeing public listing overseas comes amid a trade war between China and the US. Besides the trade war, the two nations are at loggerheads over a range of other issues, including human rights violations in Xinjiang, curbing democracy in Hong Kong, disregard of maritime boundaries, and more.

    Earlier, the Chinese internet regulator had also targeted Full Truck Alliance Company and Kanzhun Limited, the other two Chinese companies which recently rolled out their initial public offerings (IPOs) in the United States.

    Meanwhile, three other Chinese companies have put their plans of going public in the US on hold in view of the recent crackdowns.

    What China plans to do next?

    The country's cabinet has said that Beijing will improve the regulation of cross-border data flows. Under new measures, China will crackdown on illegal activity in the securities market and punish fraudulent securities issuance, market manipulation, and insider trading.

    The country will also check sources of funding for securities investment and control leverage ratios. Several experts see this as a battle of data sovereignty between the two superpowers.

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