Chinese securities regulator say companies can still IPO the U.S if they meet listing requirements

The trade war between the United States and China has affected lots of businesses in both countries making them to lose hundreds of thousands and millions of dollars in investment. Chinese companies like Didi that recently went public in the US had their IPOs reversed over regulatory issues.

"Its is a clear signal that the Chinese government is not particularly happy that these firms continue to decide to raise capital in the west," Jordan Schneider, technology analyst at research firm Rhodium Group.

However, China has said that it would continue to allow Chinese companies to list in the United States as long as they meet regulatory requirements, according to person familiar with the matter. Beijing's regulatory actions in the last few weeks has investors concerned over the block of foreign capital flows in Chinese assets.

According to the source familiar with the matter, the regulator will cross-border listings to occur using the variable interest entity structure, a legal structure that allows international investors invest in shares of a Chinese companies listed in the US. This is a strategic way for Chinese companies to attract foreign capital, as recognized by the regulator, but said it would be adjusted if there were any security concern, according to China Securities Regulatory Commission Vice Chairman Fang Xinghai, during a virtual meeting with big investment banks on Wednesday. The comment followed days of investors selling their shares in Chinese companies for fear of increased regulatory crackdown by the Chinese government.

Chinese companies listed in Asia and the US include big names like Alibaba and Tencent, saw their stocks plunge in the last few days after Chinese authorities opened fire on tech companies over data security and monopolistic practices. Stocks of Chinese tutoring companies double-plunged last week, after US authorities ordered that the companies be registered as non-profits.

Earlier this month, Beijing said it would tighten scrutiny on all Chinese firms listed offshore, as well as tighten rules for cross-border data flows in a regulatory shift that will weigh on the long-term valuations of the publicly listed companies.

"It suffices to say those Chinese companies already planning to list in the US will have to pause,or even abandon the plans altogether, in the face of mounting uncertainties and confusions," Fred Zhou, chairman of Primavera Capital Group. He added that the US market is currently off limits, at least for now as the stakes are overly high for both the tech companies and China.

US analysts say China's crackdown on firms doing business overseas increases uncertainty for firms already caught in the middle of the US-China tensions. These firms can only successfully list overseas if Chinese regulators are fully involved , as well as the international cooperation with international regulatory bodies, according to Louis Lau, director of investments at California-based Brandes Investment Partners.

"Overseas-listed Chinese companies may have had mistaken impression that it can ignore Chinese regulators just because they are not listed in China," Lau told Reuters.

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