Beijing’s war on big tech companies is ‘backfiring’, says academic

As the war for superiority and dominance of data continues between world powers, China’s actions towards tech giants in the past 12 months have been devastating. The Chinese government’s crackdown on tech companies has begun to backfire, says an academic from the Center for Strategic and International Studies.

Freeman Chair in China Studies at the center, Jude Blanchette said Beijing is treading on a delicate matter of wanting to control their tech giants yet having to ensure that they can still list overseas. He said the actions were already backfiring as U.S. lawmakers are increasing their additional oversight over Chinese companies looking to list in the U.S.

“Beijing’s walking a delicate balance here of trying to essentially bring these companies to heel with regulatory actions, but ensuring that they can still selectively IPO overseas,” he said.

U.S. lawmakers have called for oversight on Chinese firms seeking to list stateside as fears over scrutiny by Chinese regulators on tech companies are resurfacing, following regulators’ crackdown on ride-hailing app Didi last weekend.

Chinese authorities ordered app stores to remove Didi’s app for download, just days after its $4.4 billion IPO in the United States. China’s authorities have opened a cybersecurity review into three other Chinese companies listed in the U.S. Since the crackdown on Didi, its shares on the New York Exchange have tumbled almost 28%.

 “It is already backfiring in the sense that the actions that Beijing has taken especially over the weekend, these are … leading to lawmakers here in the United States accelerating their calls for additional oversight over Chinese companies listing in the United States,” Blanchette told CNBC’s “Squawk Box Asia.”

He added that if the U.S. reacted to Beijing’s actions by refusing Chinese companies IPO, the Hong Kong market, Star Market, and Shanghai will not be able to “pick up the slack in terms of IPO pipeline.” Blanchette wonders how exactly Chinese authorities intend to keep cracking down on tech giants yet allow them to IPO in other countries.

According to a 2020 data from Renaissance Capital, 30 China-based IPOs in the U.S. raised the most capital in the last seven years. The New York Stock Exchange also reported that about 60 Chinese companies were planning to go public in the U.S. this year.

Republican Sen. Marco Rubio in a statement on Wednesday said it was “reckless and irresponsible” to allow an “unaccountable Chinese company” (Didi) to list on the New York Stock Exchange.

CEO of Hong Kong-based MegaTrust Investment, Qi Wang said Beijing’s perceived crackdown isn’t necessarily what it seems. Rather it is somewhat of a “suppressive move.” He told CNBC on Thursday that China certainly wants these companies to be successful, and all that is happening is heading towards normalization of the internet space. Wang mentioned that the Chinese internet space was formerly largely unregulated, and the government has spent the last five years adding regulation.

“We’re moving from almost no regulation on internet to more regulation. Of course, during this transition, the pressure may seem high because (of) the low base.”