Editor’s note for Monday, October 12, 2020

My thoughts today — or, rather, our thoughts, as this was written together with my colleague Lucas Niewenhuis:

Why are Chinese companies still flocking to Wall Street?

Chinese companies have gone public on U.S. stock markets in record numbers under President Trump, the Financial Times reports: “Since Donald Trump assumed the presidency almost four years ago, 102 Chinese companies have debuted on the New York Stock Exchange and Nasdaq, raising $25.5 billion.” Under Barack Obama’s eight years in office, 105 Chinese companies listed in the U.S., raising $41 billion, although much of that number was made up by “the blockbuster $25bn listing of ecommerce group Alibaba in 2014.”

Some recent examples we’ve covered on The China Project: Chinese fintech giant Lufax, Muji copycat Miniso, iHuman online education, and Chinese-owned Arabic social media app Yalla. Why is this still happening, despite rapidly rising political tensions and increased scrutiny of Chinese companies?

• “Investors say U.S. capital markets continue to offer better analyst coverage especially for technology companies, as well as deeper liquidity and higher trading turnover,” says the FT.
• Other observers say that Chinese companies are rushing to absorb American capital before regulators make it impossible, driven by both the Trump administration’s hostility to China as well as heightened scrutiny after the Luckin Coffee fraud revelations.

Some companies are choosing to hedge their bets, either leaving Wall Street — like Sina and Sogou — or avoiding it altogether in massive upcoming IPOs, like Ant Group.

At the same time, Beijing is welcoming American finance firms more fully into the Chinese economy this year, after 20 years of baby steps, writes Patrick Jenkins in the FT. One possible reason for this? Jenkins writes, “President Xi’s growing appetite for a Chinese slant on Western capitalism makes financial market liberalization an obvious means to the end: Chinese financiers can gain from greater exposure to Western counterparts and the economy can benefit from the access to capital they bring.”

Upcoming events 

• This year’s NEXTChina conference will gather together some of the world’s leading experts on all things China as they discuss how the U.S. presidential election results will impact the next four years of geopolitics and business. Access members can join for free by using the promo code NC20ACCESS.
• Check out China Institute’s Executive Summit happening this week. The China Project community members can get a special discount on three-day tickets by using the promo code SUPCHINA30OFF when registering.

The China Project’s podcaster-in-chief, Kaiser Kuo, has been profiled in The Wire. It’s behind a paywall, but you can access free articles by registering with an email address.

Our word of the day is internet troll: 喷子 pēnzǐ, which can also mean “sprayer” or “spraying apparatus.”

—Jeremy Goldkorn, Editor-in-Chief