China expert Gordon Chang on Didi crackdown: US underwriters ‘had to know’
Gatestone Institute Senior Fellow Gordon Chang weighs in on China’s crackdown on ride-hailing giant Didi.
A powerful agency that China’s President Xi Jinping set up during his first term to police the internet is taking on a new role: regulating U.S.-listed Chinese companies.
The Cyberspace Administration of China, which reports to a central leadership group chaired by Mr. Xi, is taking a lead role in Beijing’s just-announced push to strengthen interagency oversight of companies listed overseas, especially those traded in the U.S., and to tighten rules for future foreign listings, according to people with knowledge of the matter.
Behind the agency’s rising clout is a desire to fix a lack of coordination between regulators, which has enabled the kind of mixed messages that preceded the blockbuster initial public offering of ride-hailing giant Didi Global Inc. DIDI -5.79% last month.
While the cybersecurity regulator sounded alarms to Didi about its network security, the people say, the main economic and financial regulators were largely supportive of Didi’s listing plan. In the absence of being told explicitly to stop its planned stock sale, Didi pressed ahead.
DIDI GLOBAL INC
For future overseas stock sales, the cyber watchdog could conceivably block a plan that is seen as threatening Chinese security.
It also highlights Mr. Xi’s escalating effort to control the private corporate sector—especially technology firms with reams of valuable data.
The increased involvement in corporate oversight by the cyberspace regulator, which has been entrusted with strengthening the state’s sway over digital information, could risk accelerating a decoupling between the financial markets in China and the U.S.
On one end are China’s regulators, led by the cyberspace authority, which are moving to make it harder for Chinese companies to sell shares overseas. On the other are American lawmakers, such as Sen. Marco Rubio (R., Fla.), who are stepping up calls to block Chinese firms from going public in the U.S. unless they submit to U.S.-style audit requirements.
CHINA'S DIDI CRACKDOWN COULD HIT TESLA, OTHER STOCKS: ANALYSTS
In China, "the cyber regulator has become the new securities regulator," says Victor Shih, a University of California, San Diego, professor of political economy who focuses on Chinese policies. "Investors and companies will find it much harder to manage the listing process."
The cyberspace administration didn’t respond to written questions.
In the vast Chinese bureaucracy, the agency is a relative newcomer with a mandate central to Mr. Xi’s vision for making China a superpower that is ringfenced from foreign interference or influence.
Mr. Xi set up the agency in 2014, two years after he rose to power, in a bid to centralize and beef up the country’s overall network and data safety. In 2013, former Central Intelligence Agency employee Edward Snowden’s leak of classified information on the U.S.’s global surveillance program had spooked the Chinese leadership with a realization of how easily information on Chinese citizens or companies could fall into the wrong hands.