The tech sector has been the golden goose for China for a long time. However, the country has decided to take the glitter off it, cracking down on the most valuable tech companies. Naturally, the US was rather pleased about such a turn of events. Being China’s main rival, the country made it difficult for Chinese tech giants to do business in the US.
After imposing tremendous fines and arresting CEOs of the biggest fintech firms, China’s government has recently switched its attention to the companies providing education services. Beijing ordered firms that offer tutoring on the school curriculum to go non-profit. By this step, the government will be able to wipe out a big chunk of the billions that private equity and venture capital funds have staked on the profitable sector. What is more, the private tutoring industry has been banned from going public. Thus, foreign capital was banned from the sector. Following such a devastating blow, the US decided to help its rival to finish off once prosperous companies.
The US Securities and Exchange Commission (SEC) has stopped processing registrations for initial public offerings (IPOs) and sales of other securities by Chinese companies while it formulates new guidance for disclosing to investors the risk of a new regulatory crackdown by Beijing. Now, companies that are planning to be listed on US exchanges must, as part of providing regular reporting, inform investors about the risks associated with Beijing's interference in their work.
The SEC's decision considerably complicates the way for Chinese businesses to receive foreign capital. After Beijing's attacks on its own companies, they would hardly expect new ones from the US. They have already incurred hefty losses due to the tightening of regulation, which at the end of July triggered a massive sell-off of shares on exchanges in mainland China and Hong Kong.
