US politicians have been firing pop guns at China Inc for years. On Friday, Xi Jinping responded with a bazooka, making it clear that while Chinese companies listed in the US irked Democrats and Republicans, they enraged the Communist party.
Didi Chuxing’s announcement that it will retreat from the New York Stock Exchange and list in Hong Kong following a regulatory crackdown from Beijing has made it clear that the Chinese president — not US politicians or even the market — will be the ultimate arbiter of where China’s corporate champions go public.
Chinese officials have long worried that the country’s stock markets would be “doomed”, in the words of one senior party official, if they could not attract its best companies. Didi’s announcement is a clear sign that the party is done with worrying and is finally prepared to act.
By comparison, US regulatory action against Chinese companies has been halfhearted and halting. This has included investment bans in largely state-owned companies that can raise as much money as they need in China and Hong Kong anyway, and clearer “warnings” from Chinese companies about the regulatory risks they face back home.
US politicians pushing for such measures were missing the forest for the trees. The fact that China’s leading and overwhelmingly private-sector technology companies routinely preferred New York to Shanghai or Hong Kong to launch initial public offerings was a big endorsement of American capital markets and a vote of no confidence in China’s. Didi, after all, was merely following a path well-worn by predecessors including Alibaba, Jack Ma’s ecommerce group, and Sina Weibo, which runs the closest in China to Twitter.
It was not a situation that Xi, who is poised to take an unprecedented third five-year term as head of the party, government and military, was going to tolerate for very long. His obsession with perceived national security risks — first in volatile and politically unreliable Chinese regions such as Xinjiang and Hong Kong, more recently in cyber space — hastened this trend. Having crushed alleged “separatists”, Xi has turned his attention to China’s politically unreliable companies.
Didi’s move to Hong Kong is also telling and links Xi’s crackdown on dissent in the territory to his “rectification” of China’s private sector. Chinese regulators would probably have had reservations about Didi listing in Hong Kong, rather than Shanghai, before a new national security law imposed by Beijing marked the beginning of the end of both the territory’s once vigorous pro-democracy movement and its freewheeling media environment.
Didi can no longer escape the kind of party discipline Xi has imposed across China over the past decade and on Hong Kong over the past few years. In this new political and economic era, the president has made clear that what is good for him and the Communist party should be good enough for Didi.