Wednesday 07 July 2021
The stock market day
China’s “data protection” shakes trillions in the US market
It’s going on on the US stock exchanges. Nasdaq and S&P 500 mark – again – all-time highs. But a two trillion dollar large part of the US stock market is currently being shaken by announcements and violent measures in China: The stock exchange listings of Chinese companies in the US.
China’s government has announced significantly tighter controls on Chinese companies that are publicly traded abroad. The new regulations are likely to make it more difficult for aspiring companies from China to raise capital on foreign stock markets such as New York or Hong Kong. The new rules are particularly aimed at “data security, cross-border data flow and the management of confidential information”, as emerged on Wednesday from a document of the State Council in Beijing.
Future IPOs should also have to be specially approved. The background to this is the government’s concern that Chinese companies traded abroad could be forced by the local authorities to make their growing amounts of data available. China’s securities regulator also wants to close previous regulatory loopholes that Chinese tech giants have used to enter the US or Hong Kong stock exchanges via investment companies in tax havens such as the Cayman Islands or the British Virgin Islands, as Bloomberg reported. In the future, a permit will have to be applied for.
Since the expected record IPO of the financial arm Ant Group of the world’s largest online trading platform Alibaba burst at the last minute six months ago, China’s authorities have tightened the reins for other tech companies and platforms as well. Most recently, immediately after its IPO in the USA, they threw the app of the transport service provider Didi out of Chinese app stores.