The decades-long, trillion-dollar love affair between China and Wall Street is coming to an end.
Didi Chuxing, a $39 billion company that is China’s answer to Uber, said on Friday it would delist its shares from the New York Stock Exchange. Just six months ago, Diddy was a Wall Street darling, raising billions of dollars from US pension funds and international investors in a spectacular initial public offering in New York.
Such deals fueled a once three-decade relationship that helped reshape the global political and financial landscape. China dumped money for Wall Street by hiring banks to manage deals such as IPOs, which, in turn, gave China access to the halls of global finance and political power, especially when introduced into Washington. The matter came
Didi’s sudden departure brought a bitter truth to Wall Street: China no longer needs it. The world’s No. 2 economy has a lot of money of its own and few problems attract more than anywhere else. of china friends on wall street passed lost his sway In Washington at a time when mistrust of Beijing’s intentions is growing. and the leaders of China instead Take tight control of your companies than opening them to investors in the US markets.
Now Wall Street has become the latest area to have leaders on both sides try to weaken The wide and complex relationship between the world’s two largest economies. And just as the alliance of China and Wall Street helped shape trade in the past, the way the two sides sever those ties could reshape its future.
,It is mutual dissection, but it is also a competition to determine the rules by which international intercourse takes place,” said Lester Ross, a partner in the Beijing office of the Wilmerhall law firm.
Beijing has been claiming more control over its private companies, especially like sister, which has comprehensive data on millions of Chinese taxi hailers and ride sharers. It seeks a private sector in line with the Communist Party’s growing focus on spreading wealth and meeting its policy goals—an objective that most Wall Street investors can’t help.
The US government, which sees China as the biggest economic, political and military rival, is putting pressure on Chinese relations. this is forced some state-controlled Chinese companies in delisting their US shares. US Securities and Exchange Commission on Thursday adopted rule This would require unwilling Chinese companies listed in the United States to open their books to American accounting firms or to close their stock exchanges.
The attraction between China and Wall Street is becoming increasingly one-sided. Wall Street Banks such as Goldman Sachs and JPMorgan Chase Hiring and investing heavily In building our business in mainland China. Chinese regulators have loosened limits on what foreign banks can do inside the country, but firms will still be subject to Chinese laws and customs.
China also has Hong Kong, which financial capital remains In-spite of this Beijing is tightening its grip On government and daily life. Didi on Friday paved the way for allowing investors who had bought shares on the New York Exchange to swap them for ones that will someday soon be traded in Hong Kong.
Didi’s move will focus on Chinese companies that still do business in the United States, and they represent a lot of money. A congressional commission estimated this year that about 250 Chinese companies had a total turnover of $2.1 trillion in shares traded on US exchanges.
The most prominent is e-commerce giant Alibaba, which held the largest IPO in the world in 2014 when it sold shares in New York. The company did not immediately respond to a request for comment.
Chinese regulators are said to be looking at ways to limit Chinese listings in the United States. This week, they denied a report that they would be shutting down a legal loophole That Chinese companies such as Didi and Alibaba have long used to list overseas while still keeping corporate control in the mainland. But even without much regulatory action, some Chinese companies have listed in the United States since Didi’s IPO and a subsequent regulatory action On company by Beijing.
There was a time when Wall Street bankers could lobby Washington on behalf of China and get results. In the late 1990s, when China was trying to ease trade barriers, Zhu Rongjie, then its premiere, flew to New York to meet finance and business leaders. Head of Goldman Sachs and American International Group later worked to persuade In 2001, President Bill Clinton signed an agreement to help China join the World Trade Organization.
Wall Street was also able to intervene when President George W. Bush and Barack Obama considered labeling China a currency manipulator, urging lawmakers to reconsider taking official action against Beijing’s efforts to weaken its currency to promote its importers.
These days, Blackstone’s Stephen A. Calls from Wall Street executives like Schwarzman, who has raised more than $500 million for a scholarship program at China’s prestigious Tsinghua University, are falling sharply on deaf ears in Washington. In 2019, the Trump administration labeled China a currency manipulator. The post was later formally removed, but the feeling of being tough on China remains.
As US-Chinese relations cool down, more companies like Didi will be caught in the middle.
“It’s bad for business to flex their economic and regulatory powers between the two superpowers,” said Paul Leder, an attorney for Miller & Chevalier and former director of the SEC’s Office of International Affairs.
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Delisting may raise investor concerns over what appears to be a The growing hostility of Chinese officials To domestic companies that list shares on foreign exchanges.
For Didi, once hailed as an innovator and disruptor in China’s stagnant transportation sector, it has been a rapid fall from grace. In 2016, it was considered the pride of China’s daring start-up scene when it defeated its US rival, Uber, and bought that company’s Chinese operations. Its promises to use its banks of data to control traffic and develop driverless car technologies made its executives icons.
When it listed over the summer in New York, Didi was following a long list of Chinese success stories that were seen on Wall Street as the ultimate validation of the company’s commercial achievements.
Beijing’s sudden sway over Didi shook the company’s new Wall Street shareholders. Since its blockbuster IPO, Didi’s share price has nearly halved.
Reprimanding Didi, Chinese regulators followed up its Megabucks listing with a series of regulatory slaps. Concerned that the listing could mean Didi may transfer sensitive data on Chinese riders in the United States, regulators forced the company to register new users two days after the IPO as they began a cybersecurity review of its practices. Had it.
Soon after, officials ordered a halt to downloads of Didi’s main, consumer-facing application before blocking 25 more of the company’s apps, including the company’s car-pooling app, its finance app, and apps for corporate customers. .
David Webb, a former banker and longtime investor in Hong Kong, said investors can still go to Hong Kong if they want to invest in Didi or other Chinese stocks. But broadly, China wants its companies to be at a distance.
“It’s part of a mainland government plan to ‘bring them home’ and break away from US regulation,” he said.