China Signals End to $2 Trillion U.S. Listings Juggernaut

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(Bloomberg) — For two decades Chinese tech firms have flocked to the U.S. stock market, drawn by a friendly regulatory environment and a vast pool of capital eager to invest in one of the world’s fastest-growing economies.

Now, the juggernaut behind hundreds of companies worth $2 trillion appears stopped in its tracks.

Beijing’s July 10 announcement that almost all businesses trying to go public in another country will require approval from a newly empowered cybersecurity regulator amounts to a death knell for Chinese initial public offerings in the U.S., according to long-time industry watchers.

“It’s unlikely there will be any U.S.-listed Chinese companies in five to 10 years, other than perhaps a few big ones with secondary listings,” said Paul Gillis, a professor at Peking University’s Guanghua School of Management in Beijing.

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The clampdown, triggered by Didi Global Inc.’s decision to push ahead with a New York listing despite objections from regulators, is already sending shockwaves through markets. A gauge of U.S.-traded Chinese stocks has dropped 30% from its recent high. For investors in companies that have yet to list, there’s growing uncertainty over when they may get their money back. Wall Street firms are bracing for lucrative underwriting fees to dry up, while Hong Kong is set to benefit as Chinese companies look for alternative — and politically safer — venues closer to home.

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