CSIS against Chinese crackdown on Chinese tech giants like Didi, Alibaba and Ant – .

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CSIS against Chinese crackdown on Chinese tech giants like Didi, Alibaba and Ant – .


According to an academic from the Center for Strategic and International Studies, Beijing’s crackdown on tech companies is “turning against China,” as US lawmakers call for oversight of Chinese companies seeking to register with the United States.
Fears about regulatory oversight of Chinese tech companies are growing again, after China cracked down on ridesharing app Didi last weekend. Authorities ordered app stores to remove Didi’s app for download – days after the Chinese company launched its US IPO

Chinese regulators alleged that Didi illegally collected users’ personal data.

Since then, China has opened a cybersecurity review in three other Chinese companies listed in the United States.

According to Jude Blanchette, the centre’s Freeman Chair in Chinese Studies, Beijing is walking a “delicate balance” by controlling its tech giants while having to make sure they can still enroll abroad.

“It’s already backfiring in the sense that the actions Beijing has taken in particular over the weekend, these (…) are leading lawmakers here in the US to step up their calls for additional corporate oversight. Chinese listed in the United States, ”he said. told CNBC’s “Squawk Box Asia” Thursday.

Beijing is walking a delicate balance here by essentially trying to keep these companies in line with regulatory actions, while also ensuring that they can still conduct a selective overseas IPO.

Jude Blanchette
Freeman Chair in Chinese Studies, CSIS
Republican Senator Marco Rubio told the Financial Times in a statement Wednesday that it was “reckless and irresponsible” to allow Didi – an “irresponsible Chinese company” – to sell shares on the New York Stock Exchange.

Since China’s crackdown over the weekend, Didi shares in New York have fallen nearly 28%.

“In reality, if the United States starts to deny IPOs here… you know the Hong Kong market, the Star market, Shanghai cannot take over in terms of the IPO pipeline,” he said. declared Blanchette. “Beijing is therefore seeking a delicate balance here by essentially trying to get these companies to follow regulatory measures, but ensuring that they can still carry out a selective IPO abroad. “

Qi Wang, CEO of Hong Kong-based MegaTrust Investment, however, said it was not necessarily a crackdown “or some kind of crackdown.”

China probably “very much” wishes these companies to be successful again, he told CNBC on Thursday, adding that what is happening now is actually a normalization of the internet space.

“To set the context, remember that the Chinese internet space was largely unregulated before, and the government only added regulations in the past five years, perhaps,” he said. he declared. “We are moving from almost no regulation on the Internet to more regulation. Of course, during this transition the pressure may feel high because of (the) low base. “

In 2020, 30 China-based IPOs in the US raised the most capital since 2014, according to data from Renaissance Capital.

At the end of April, around 60 Chinese companies were still planning to go public in the United States this year, according to the New York Stock Exchange.

Politics vs business interests

Over the past 30 years of opening up the country, China has repeatedly needed to cite business examples to get this message across: There is a “great degree of leeway” for business and earnings. money, but basically you have to know where the political lines are, says Blanchette.

“The sentence is, ‘Kill the chicken to scare the monkey,’” he said. “With companies that have come under scrutiny recently, there is -om Beijing’s perspective – a political ‘sin’ that the company has transgressed. “

While there is absolutely a regulatory rationale for Beijing to exercise tighter control over these companies, it is inseparable from the political argument.

Freeman Chair in Chinese Studies, CSIS
Blanchette noted that Alibaba founder Jack Ma’s speech last year was the “immediate cause that started it all.”

Ma gave a speech in Shanghai last October, lambasting China’s regulatory system for stifling innovation. As a result of this speech, it disappeared from the public eye for a while, which also led to the suspension of a mega IPO of Alibaba’s fintech arm, Ant Group.

“While there is absolutely a regulatory rationale for which Beijing exercises tighter control over these companies, it is inseparable from the political rationale,” added Blanchette.

Blanchette also warned that all of this regulatory review “will not go away.”

“This is the ongoing reality, I think, of a newly revitalized regulatory apparatus in Beijing, which views the degree of control these tech companies have acquired in the domestic market as untenable,” he said.

– CNBC’s Evelyn Cheng contributed reporting.

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