China’s cabinet on Tuesday said that China would step up supervision of the Chinese firms listed offshore, days after Beijing launched a cybersecurity investigation of Didi Global Inc due to its US stock market listing.
China’s Cabinet said that China under the new measure would be improving the regulation of cross-border data flows and its security, crack down on the illegal activities in the security market as well as punish fraudulent securities issuance, market manipulation, and insider trading. They would also be checking the sources of funding for security investments and control leverage ratios.
The Didi Shares, earlier on Tuesday, fell as much as 25 percent in the US pre-market trade before the first session since the Cyberspace Administration of China ordered the removal of the company’s app from the app store in the country just after a $4.4 billion listing on the New York State Exchange.
The CAC on Monday had announced the cybersecurity investigations into US-listed Chinese companies, Full Truck Alliance and Kanzhun Ltd, and their affiliated businesses, hence the two companies were set to open lower on Tuesday.
In March, the U.S. securities regulator began a rollout of rules to exclude foreign companies from U.S. exchanges if they did not comply with U.S. auditing standards, a move aimed at removing Chinese firms from U.S. exchanges if they fail to comply with U.S. auditing standards for three straight years.
Beijing had been pressing audio platform Ximalaya to drop US listing plans and opt for Hong Kong in May as the growth of Beijing was concerned because the US regulators would potentially gain greater access to the audit documents of the New York-listed Chinese companies.
In the past two years, US-listed big Chinese companies had issued shares in Hing Kong, like the internet giants Alibaba and Baidu.
For the Chinese tech firms, the US exchanges had been popular listing venues, as being attracted by deep liquidity, high valuations, and easier profitability rules.
