Then, during the meeting of the China Politburo Standing Committee on July 30, a proposal was raised to improve the supervision system of overseas listing of enterprises.Īffected by this, some Chinese companies have voluntarily canceled their IPOs in the United States. Within a trading week, after the news was released, 201 of the 277 CCS suffered losses, and their total market value shrank by CNY 1.6 trillion. JD, PDD, and BILI all fell more than 8%, and BEKE plunged more than 20%. The market panic has spread to other related fields, such as the Internet and real estate. TAL closed down 70.76%, GOTU fell 63.26% and EDU fell 54.22% on July 23. The three major domestic education giants suffered heavy losses. At the end of July, influenced by the new policy of private tutoring, the US and Hong Kong-listed education stocks plunged one after another. In early July, the DiDi event broke into the news, indirectly causing a China Concepts Stock (CCS) crisis. However, the number of the Asian country's companies' US IPOs and the proceeds they raised reached historical highs in the first half of 2021. China and the United States have built a high wall between them on investment, affecting Chinese companies and investors' confidence. At the closing on March 24, 2021, more than 40 Chinese stocks fell by more than 10%: Tencent Music fell more than 27%, iQIYI fell nearly 20% and Vipshop fell more than 21%. In March 2021, the United States passed the final amendment to HFCAA and added a new requirement for listed companies to disclose their relationship with the Chinese government. On April 27, 2020, the Cyberspace Administration of China (CAC) promulgated Measures for Cybersecurity Review 2020, which is interpreted by some in the industry as China's measure to protect national information security. The act requires foreign companies to provide three-year audit working papers to the Public Company Accounting Oversight Board (PCAOB), otherwise, they may be forcibly delisted. Reviewing the timeline of relevant events in the past two years may shed some light on future development.Īfter the Luckin Coffee fraud event in April 2020, the US Congress passed the Holding Foreign Companies Accountable Act (passed the Senate on May 20, 2020, and passed the House on December 2, 2020). Clearly, the SEC has no choice but to step up and protect US investors from further losses related to the country's risk.Ĭhina Concepts Stocks – key event timeline The Nasdaq Golden Dragon China Index (HXC: NASDAQ) saw over 15% knocked off within two trading days after the announcement. According to the new private tutoring rule, all institutions offering tutoring on the school curriculum will be registered as non-profit institutions, and the Chinese Government will not grant new licenses to such companies. Obviously, the statement was mainly caused by the DiDi event ( check here) and the new private tutoring regulations starting from July 23, 2021.

In the statement, the author also made investors aware of the fact that they will only own stocks of shell companies (Variable Interest Entities, VIEs) rather than operating companies in China. Exchange Commission Chair Gary Gensler published a statement saying that China-based operating companies should disclose extra information, including their legal structures and the risk of the Chinese government interfering in their businesses, to be listed in US markets. The benefit of US market IPOs is decreasing for Chinese companies in the following period, figures like the listing amount, valuation, and company quality are set to change drastically.

The golden age for Chinese companies being listed in the United States is over. The so-called 'DiDi event' and new private tutoring rules may be the primary reason why SEC now requires China-based operating companies to disclose extra information.

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