China’s regulatory crackdown

CHINA ADVISORY - Report 07 Jul 2021 by Andrew Collier

China appears to be increasing the pace of state regulation of the country’s technology companies beyond what most analysts had originally expected. The latest intervention came in the form of a probe by the country’s cybersecurity administration into Didi Chuxing’s data policy – just two days after the company completed its $4.4 billion IPO. China’s state council has just announced it will give the country’s domestic regulators additional powers to approve or deny offshore listings.

This follows Xi Jinping’s aggressive 100th Communist Party anniversary speech, which had Maoist overtones and an aggressive posture toward the west. The speech comes as there is growing street-level intervention in Hong Kong’s economy and political life. One portfolio manager quoted in the Wall Street Journal called this “regulatory risk.” It is far more than that. The reach of the state is beginning to run from the senior leadership down to smaller governmental units and is altering China’s relationship with the global economy. The global investment community is now deeply involved in China’s economy and should be aware of the larger risks.

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