Has China’s Signaled Regulatory Reprieve Come Too Late?

Has China’s Signaled Regulatory Reprieve Come Too Late?

This morning, shares of Chinese businesses listed on the New York Stock Exchange, particularly those related to technology, are soaring. Comments by Chinese government official Liu He on both foreign-listed Chinese shares and the speed of change in the country’s economy drove the day’s trade. The Exchange reported yesterday that a selloff in Chinese stocks had accelerated in recent days, owing to investor concerns about the Chinese government’s COVID-19 policies, its closeness to the increasingly isolated Russian government, rapid-fire regulations on major tech companies, and a shift in government thinking about its economy — the “common prosperity” effort.

Today, however, things are looking brighter for Chinese enterprises, at least in terms of valuation, as a result of the announcement. The NASDAQ Golden Dragon China Index, for example, which includes 93 different U.S.-listed Chinese firms, is up over 18 percent this morning. Alibaba and Baidu are both up 17 percent, Bilibili’s stock is up 30 percent, and so on. What’s different now? According to a CNBC translation of the words in question, the “Chinese government continues to encourage all sorts of enterprises’ abroad listings.”

Given market concerns that businesses might be compelled to delist, this is a relief for holders of foreign shares in Chinese corporations. The memo also mentions that regulatory work should be finished quickly, which is good news. Other issues discussed were monetary policy, the real estate sector in the nation, and Hong Kong. It’s crucial that the Chinese government is reversing its stance from last year, when it was busy attacking Chinese IT companies’ business models, labor standards, data rules, and financing sources. Not just for firms immediately affected by the news of the day, but also for entrepreneurs wishing to establish themselves in the nation.

Remember that we saw an early hint yesterday that China’s rate of venture capital investment was decreasing in the first quarter? No single element can be held entirely responsible for the transformation. However, many people contributed to it, and if China is ready to keep additional exit options available — such as international IPOs — while also providing more regulatory space for businesses to grow, it’s a fantastic formula for greater startup activity. In terms of activity, the Chinese venture capital market used to compete with that of the United States. Those were the days, but they are long gone. But, leader or not, there are a lot of people who want to create in China, so we’re keeping an eye on their progress.