Shares of US-listed Chinese companies, especially tech companies, are shooting higher this morning. The day’s trading was driven by comments from Chinese government official Liu He about both foreign-listed Chinese stocks and the pace of reforms in the country’s economy.
Yesterday, The Exchange noted that a sell-off in Chinese stocks had strengthened in recent days; uncertainty over the Chinese government’s COVID-19 policies, proximity to the increasingly exiled Russian government, rapid regulation for major tech companies, and a shift in the government’s thinking about its economy — the effort of “common prosperity” — had upset investors.
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Today, however, in light of the ruling, things are looking good for Chinese companies, at least in terms of valuation. For example, the NASDAQ Golden Dragon China Index, made up of 93 different US-listed Chinese companies, shot nearly 18% higher this morning. Alibaba and Baidu are each up 17%, Bilibili’s shares are up 30%, and so on.
What is changing?
The comments in question — here in Chinese — indicate, according to a CNBC translation, that the “Chinese government continues to support foreign listings of various types of companies.”
This is a relief for holders of foreign shares of Chinese companies, given market concerns that companies could be forced to delist. The document also notes that regulatory work needs to be completed quickly – more welcome news. Other topics were mentioned, including monetary policy, the country’s real estate market and Hong Kong.
That the Chinese government may pull out of the stance it took last year when it was busily chasing the business models, labor practices, data policies and capital sources of Chinese tech companies is incredibly important. Not only for the companies that are directly affected by the news of the day, but also for startups that want to build in the country.
Recall that yesterday we saw an early indication that the pace of venture investment in China is slowing in the first quarter. No factor can take full responsibility for that change. But many have contributed to it, and if China is willing to keep open more avenues for exits — foreign IPOs — while also creating more regulatory space for companies to build, well, it’s a good recipe for more startup activity.
The Chinese venture capital market was once a challenge to the United States VC market in terms of activity. Those days are now years gone. But leading status or not, there are many people who want to build in China, so we follow their fortune.