China is moving forward in its push to further regulate companies whose shares are listed on foreign stock exchanges. The Cyberspace Administration of China, which reports to the country’s top leaders, will take on a new role — policing those companies, The Wall Street Journal reported.
Over the July Fourth weekend, that agency ordered Chinese app stores to remove the rideshare giant Didi Global from their platforms. The move came just three days after Didi’s $4 billion initial public offering (IPO) on the New York Stock Exchange.
In addition, the Chinese regulator started probes of two other U.S.-listed companies as well. The Chinese government offered little in the form of an explanation, leaving the media and the global investment community in the dark on how extensive the crackdown might become.
Before the government’s latest move, Chinese firms had been going public on U.S. exchanges at a record pace. By late April, U.S. initial public offerings this year had generated $6.6 billion for companies from mainland China and Hong Kong — eight times the same period in 2020, Bloomberg reported, citing its own data.
Chinese President Xi Jinping set up the Cyberspace Administration of China in his first term to police the internet, per the WSJ. In its new role, the agency is particularly interested in companies listed in the U.S.
One problem with the Chinese setup has been a lack of coordination between regulators. Sources told the WSJ that the cyberspace watchdog had been sounding the alarm over Didi’s network security. However, the main economic and financial regulators were largely supportive of Didi’s plan to go public.
Without clear directions, Didi went ahead with its stock-listing plans. Soon after the IPO, the Chinese internet watchdog took its aggressive move against the company.
The move was similar to the sudden increased regulatory scrutiny of Jack Ma’s Ant Group last fall.