It was a disaster with an announcement. The Chinese transport service provider Didi had long resisted reports that the company, which had just been listed on the New York Stock Exchange, withdrew from the American floor only a short time later. But the pressure from Beijing was apparently too great: Didi had to admit defeat and go from the American to the Hong Kong stock exchange.
The last five months have been a nightmare for the Uber counterpart, which is very popular in China. Because Chinese authorities and ministries attacked the company again and again, accusing it of data protection violations, its share value collapsed by around 50 percent.
This is once again sending out a clear signal for other Chinese tech companies. Firstly: Don’t mess with the regulators in Beijing – Didi is said to have been warned before the IPO that the authorities had data protection concerns, and he stuck to them anyway.
Second: If your business model is based on a large collection of data, it would be better to go public on the Hong Kong stock exchange despite all your concerns – even if the company is thus placing itself under the direct influence of the Chinese government.
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The latter has drastically tightened control over data that it sees as sensitive in the past few months. Companies that have the data of more than a million users now have to obtain approval if they want to be listed in other countries.
New law requires foreign companies to open their books for US exams
However, it is also a fact that new US rules could make it more difficult for Chinese companies to list themselves on the New York Stock Exchange. On Thursday, the US Securities and Exchange Commission announced its plan to implement a new law requiring foreign companies to open their books for US exams.
If they do not do this, they are threatened with exclusion from the stock exchange. Chinese and Hong Kong companies in particular had apparently not complied with this requirement so far. It is doubtful that the Chinese leadership will allow this kind of opening in the current political environment.
Taken together, the rules are likely to further decouple the financial markets. In the future, Chinese companies could preferentially be listed in Hong Kong – and thus comply with the request of the state leadership in Beijing.
More: Didi pulls out of the New York Stock Exchange – Chinese tech stocks collapse