Global hegemonic dispute to bring Chinese shares to the Hong Kong Stock Exchange

The interventionist posture of the Chinese government in relation to technology companies in the Asian country, which takes place in a context of dispute for hegemonic strength with the United States, is yet to bring about important changes in the current configuration of the global financial market.

The assessment of experts is that China is making it clearer every day that it will not accept an excessive growth of some digital businesses that could pose any risk to its long-term plans for the Asian giant’s economy on an international scale.

The most recent sign in this direction came on Friday (3), after the Didi Group, known as the “Chinese Uber”, pressured by Chinese authorities, informing that it will no longer be listed on the New York Stock Exchange.

After a Chinese company’s second-largest IPO in the US in June, Didi Group’s shares have since gone downhill, down 56.6% in accumulated terms — on Friday alone, shares fell 22.2% .

The debut on the US stock exchange was overshadowed by a cybersecurity investigation by the Chinese government, which encourages the country’s big tech companies to list shares in their markets, such as Hong Kong, Shanghai, Shenzhen or Beijing.

After several months of government pressure, the coup de grace appears to have come from the United States. The agency that regulates the activities of the American Stock Exchange (SEC) adopted a rule to be able to withdraw foreign companies that do not have an authorized audit, which includes all Chinese groups on Wall Street.

A few hours later, the company Didi Chuxing announced its delisting from the American stock exchange. “After careful consideration, [a Didi] will start the delisting process from the New York Stock Exchange as of today and will begin preparations for listing in Hong Kong,” the company said in a statement.

With 15 million drivers and nearly 500 million users, Didi dominates the market for private urban transport applications in China. The company owns 99 in Brazil.

According to Ruy Alves, global equity manager at Kinea, given the very incisive posture that has been adopted by China in recent months, the trend is that, over time, most of the large Chinese technology companies that have been listed on the American market ends up migrating its shares to the Hong Kong Stock Exchange, the largest in the Asian market.

“I believe it is a very possible path to happen [a migração das ações para a Bolsa de Hong Kong], because it is effectively the only mechanism that China has to fight the US, which still has a much greater dominance, both in the area of ​​technology and in financial terms on a global scale”, endorses Pedro Brites, professor and vice-coordinator from the IR (International Relations) course at FGV (Fundação Getúlio Vargas).

Based on sources close to the case, a Bloomberg report pointed out that the Chinese regulatory agency demanded that Didi executives withdraw the group from the New York Stock Exchange due to fears of leaks of data considered sensitive.

“The posture of the Chinese government was quite impactful on the market, as we can see from the fall in shares, as they are solid and very large companies within their sectors, such as Didi”, says Brites.

Alves, from Kinea, recalls that, when raising funds and listing their shares in the US market, Chinese companies became the target of pressure from US regulators to open strategic data stored in their systems, which naturally is viewed quite negatively by Beijing.

“There is no open discussion in China about the Communist Party’s dominance, and some tech businessmen who started to get very rich, like Jack Ma, began to question the Party publicly,” says Alves. “By crossing that line, the Chinese government quickly remembers what the limits are to set an example,” he adds.

The power that big American techs like Google and Facebook have achieved in the United States will be fought at all costs so that it does not repeat itself in the same proportion in Chinese territory, predicts the expert. “The Chinese government in no way wants to lose its monopoly on monitoring data and controlling the behavior of the population.”

With the prospects that the Chinese government’s more interventionist stance is here to stay for a while, the Kinea manager says it has been avoiding exposure to Chinese companies at this time within the portfolios of multimarket funds.

“Although we saw during the Trump administration the clash between the US and China more linked to the trade sector, that was just a symptom of a much deeper competition between the two powers, which has now manifested itself mainly in the area of ​​technology”, he says Brites, from FGV.

According to him, Didi and Alibaba are examples of companies that managed to take advantage of the size of the Chinese market to reach a global scale, and that started to represent a risk to China’s long-term plans to become the largest and most dominant economy of the Planet.

“The government’s assessment seems to be that it’s worth the cost of putting pressure on Chinese companies now, even if they make occasional losses, but ensuring they stay within China’s global insertion process,” Brites says.

(With Reuters)