Rules for local companies: China makes going public abroad difficult

To raise capital, many Chinese start-ups went public in the United States. Now China has issued rules that make going public abroad much more difficult. The largest economies are thus further decoupling.

In China, companies from the booming tech and online industry will no longer be able to go public abroad without further ado. This was announced by the Internet authority of the Chinese state and party leadership in the morning. Companies that store data from more than one million users are affected.

Official reason: data security

In the People’s Republic, more than a billion people are regularly online, which is why many app providers and tech start-ups quickly reach a million users and more. In this respect, the new rules affect almost all of the country’s major tech companies. In the future, you will have to pass a state data security check before you can go public in New York, for example.

Officially, the authorities of the People’s Republic are concerned with data security. Most international analysts expect that under the new rules of state and party leadership hardly any Chinese companies will go public in the US.

Foreign capital for start-ups

The decoupling of the two largest economies in the world is thus continuing. In recent years, numerous Chinese start-ups have gone public in the US to attract international investors and foreign capital. For example, with Alibaba, Tencent and JD, China’s largest online and shopping groups are listed on the New York Stock Exchange, as well as the electric car manufacturer Nio and, for ten days, the driver service platform Didi.

Pressure on private companies, strengthening of state corporations

However, only shortly after Didi’s stock market debut, worth billions, the authorities in China announced that they were investigating the company. The reason given was violations of data protection rules.

For several months now, the ruling Communist Party in China has been vehemently taking action against the country’s large private Internet companies; in concrete terms, it limits their economic and social influence. The IPO of the world’s largest financial tech group, Ant Group, was canceled.

Company founder Ma Yun alias Jack Ma was de facto forced to withdraw from the public. At the same time, the Chinese leadership has strengthened the role of state-owned corporations.