US-China relations updates

Beijing’s market regulator has called for closer communication with Washington in a bid to ease tensions after the US tightened controls on Chinese companies listing shares in America.

The US Securities and Exchange Commission said on Friday that Chinese groups would be subject to stricter disclosures over their structures and state ties before being allowed to list shares in the US.

In response, the China Securities Regulatory Commission said on Sunday that strengthened regulatory co-operation between the US and China was needed, and stressed Beijing’s efforts to improve the transparency and predictability of its policies.

The calls for talks by Chinese regulators come as investors brace for prolonged uncertainty amid a snowballing regulatory crackdown in the world’s second-biggest economy that threatens to embroil the country’s most prominent tech groups.

US concerns were heightened in July after Chinese officials launched a data security investigation into Didi Chuxing, China’s biggest ride-hailing app, days after the company’s $4.4bn New York initial public offering.

The CSRC statement comes after it privately sought to ease international investor worries, telling a group of Wall Street banks that its crackdown on the tutoring sector was an isolated event.

But there are broader headwinds facing Chinese tech groups, equities markets and foreign investors in the country.

Among the companies already in the regulator’s crosshairs are billionaire Jack Ma’s fintech Ant Group, the $100bn tutoring industry as well as Tencent, owner of the massive WeChat social app. Delivery platform Meituan and Ma’s ecommerce business Alibaba have been subject to antitrust investigations.

Beijing on Friday promised stronger controls for Chinese companies selling shares overseas, following a top-level meeting chaired by President Xi Jinping.

China’s central bank has urged further “rectification” of the country’s fintech sector, adding more pressure on tech groups, according to a statement released on Saturday.

The People’s Bank of China called for fintech companies to improve competition and consumer rights as it signalled stricter oversight on illegal cryptocurrency activities while also forging ahead with its own efforts to develop a digital renminbi. The latest warning from the PBOC did not name any companies.

The clampdown on China’s huge tech sector comes as the country faces an uneven economic recovery from the coronavirus pandemic.

An important gauge of manufacturing industry health in China reflected a worse than expected slowdown in July.

China’s official purchasing managers’ index fell to 50.4 last month down from 50.9 in June, reflecting rising inflationary pressures, shrinking export growth and the effect of extreme flooding in parts of the country.

While the index was above the 50 point marker separating expansion from contraction, July marked the weakest reading since February 2020, when China was hit by sweeping lockdown measures.

Goldman Sachs analysts, who had forecast growth of 50.7, noted that China’s new export order sub-index fell to 47.7 in July from 48.1 in the previous month, the lowest since June last year.

The deceleration in Chinese factory activity followed Beijing’s warnings of an unbalanced economic recovery when it reported quarter-on-quarter GDP growth of 1.3 per cent for the three months to June.

Complicating China’s outlook, health officials are grappling with a coronavirus outbreak that has broadened from Nanjing, the provincial capital of eastern province Jiangsu, with locally transmitted cases reported across seven other provinces. China’s National Health Commission said in its latest update that there were 53 new locally transmitted cases.

Additional reporting by Sun Yu in Beijing

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