Late last year, former US President Donald Trump limited the ability of Chinese companies to trade on American stock exchanges
But in the White House, the new owner and Chinese companies feel great on the American stock exchanges, withdrawing billions of dollars from there to their place in China.
As the American edition of The Epoch Times writes, despite the continuing political tensions between the United States and China, the two largest economies in the world are becoming increasingly interconnected financially.
Even as the US Congress begins to tighten its grip on Chinese companies that are listed on US stock exchanges, these companies continue to seek capital in the US. Since the beginning of this year, they have raised a record amount of dollars through an initial public offering (IPO) on US exchanges.
In March, the US Securities and Exchange Commission (SEC) announced that it would begin implementing the Holding Foreign Companies Accountable Act to provide stricter disclosure rules for foreign companies traded in the United States. Including Chinese ones.
However, these actions had little effect on the desire of Chinese companies to receive capital from American financial markets: they are lining up for an IPO on the US stock exchanges.
According to Deloitte & Touche, since the drug manufacturer Qilian International Holding Group Ltd. became the first Chinese company this year to sell its shares on the Nasdaq, Chinese companies have already raised about $ 4.4 billion by the end of March through 20 IPOs. The largest IPO was the placement of RLX Technology Inc. (a manufacturer of electronic cigarettes), in which the company received $ 1.6 billion. This is an incredible amount considering that last year, during the same period, Chinese companies carried out only six IPOs in the United States, in which they raised $ 370 million.
And there are a few more high-profile Chinese IPOs on the horizon.
So why are so many Chinese companies continuing to list their shares on US exchanges despite the obvious regulatory risks?
The US stock market is an ocean compared to a Chinese pond. The total market value of all Chinese companies traded on US exchanges was $ 1.9 trillion as of April 30, 2021.
The value of all companies on the Chinese stock markets is about $ 11.7 trillion. This is the sum of the Shanghai Stock Exchange’s market capitalization of $ 6.5 trillion and the Shenzhen Stock Exchange’s market capitalization of $ 5.2 trillion. This means that the value of Chinese companies listed on US exchanges is approaching 30% of the Shanghai exchange, 37% of the Shenzhen exchange, or 16% of the two largest exchanges in China combined.
The total market capitalization of the U.S. stock market as of March 31, 2021 was $ 49 trillion, according to Siblis Research.
So what does this mean? The fact that raising capital from abroad is a key financial strategy for many Chinese companies, and this, apparently, is not prohibited by the Chinese authorities.
It is also worth adding to the overall picture that the Chinese authorities have been actively investing in American government bonds since the beginning of 2021, which further ties the financial systems of the United States and China to each other.
China is buying up US government bonds as “not into itself”.
Russian Demiurge