According to ABC, U.S. listings have been an American dream for many Chinese companies. However, some of them may see this dream dissolve due to tightened regulations from the U.S.
Chinese entrepreneurs consider the U.S. a dreamland for international reputations and more flexible access to capital than their home country.
Therefore, the American dream of reaching the U.S. stock market debut has been widely shared among Chinese businesses over the past decades.
James Fok, veteran financial analyst and author of Financial Cold war, says that many Chinese companies don’t just want to be large Chinese businesses but large global enterprises.
Currently, 261 Chinese companies are listed on the New York stock exchange (NYSE), with a total capital of around 1.9 trillion dollars.
The U.S. tightened scrutiny
The U.S. Securities and Exchange Commission (SEC) has gradually raised concerns over U.S.-listed Chinese companies since the Luckin Coffee scandal.
A rising star, Luckin Coffee, had opened about 2,400 coffee shops across China and raised 645 million dollars through its listing on Nasdaq only within two years since its advent in 2017.
However, it almost collapsed in 2020 after 310 million dollars in sales for the previous year was found to be fabricated.
At the end of 2020, U.S. Congress passed a bill restricting Chinese companies from listing on NYSE if they refuse to comply with U.S. auditing processes.
SEC listed over 80 enterprises, such as Chinese e-commerce giant JD.com and video platform Bilibili, which are facing the risk of being delisted.
They have joined a growing list of Chinese businesses – from tech leader Baidu to fast-food chain Yum China – that the SEC claims will be barred from the U.S. capital market in 2024 unless they comply with new auditing criteria over the next two years.
Chinese companies’ current dilemma
On the one hand, Beijing prefers Chinese companies listed in the domestic market. This is because China is worried that enabling the U.S. to examine materials of Chinese companies may be used against Beijing in the next stage of the trade war between the two countries.
On the other hand, for the sake of “common prosperity,” Chinese authorities have started to crack down on billionaires and tech giants, targeting offshore-listed firms whose wealth is difficult to track.
As a result, many tech giants have changed or withdrawn their listing plans.
Chinese ride-hailing giant Didi announced its delisting from the U.S. to relist in Hong Kong in early May, just a year after its New York debut.
Tiktok owner ByteDance decided to delay its planned listing indefinitely after regulators asked the company to address data security.
Other entrepreneurs, such as Baidu’s co-founder and CEO Robin Li, are at a crossroads. They are seemingly confused about the road ahead.
James Fok thinks non-Chinese global companies probably see Hong Kong as far less attractive today than five years ago. He adds, “but Chinese companies don’t have a lot of choice here.”