NEW YORK (NYTIMES) – The decades-long, trillion-dollar love affair between China and Wall Street is coming to an end.
Didi Chuxing, a US$39 billion (S$53 billion) company that is China’s answer to Uber, said on Friday (Dec 3) that it would delist its shares from the New York Stock Exchange.
Just six months ago, Didi was a Wall Street darling, raising billions of dollars from United States pension funds and international investors in a splashy New York initial public offering.
Those sorts of deals once fuelled a three-decade relationship that helped reshape the global political and financial landscape. China generated heaps of money for Wall Street by hiring banks to manage deals like IPOs. In return, Wall Street gave China access to the halls of global finance and political power, especially when it came to introductions in Washington.
Didi’s abrupt decision to leave brings home a stark truth for Wall Street: China doesn’t need it anymore. The world’s No. 2 economy has plenty of its own money and few problems attracting more from elsewhere.
China’s friends on Wall Street have lost their sway in Washington at a time when mistrust of Beijing’s intentions is running high. And China’s leaders would rather keep tight control of its companies than open them up to investors on US markets.
Now Wall Street has become the latest area in which leaders on both sides are trying to weaken the extensive and complicated ties between the world’s two largest economies. And just as the alliance of China and Wall Street helped shape business in the past, the way the two sides disentangle those ties could reshape its future.
“It is mutual decoupling, but it is also a contest to set the rules by which international intercourse takes place,” said Mr Lester Ross, a partner in the Beijing office of the WilmerHale law firm.
Beijing has been asserting greater control over its private companies, particularly those like Didi, which has extensive data on hundreds of millions of Chinese taxi hailers and ride sharers. It seeks a private sector more in line with the Communist Party’s growing focus on spreading wealth and meeting its policy goals – aims that Wall Street investors most likely can’t help with.
The US government, which sees China as the greatest economic, political and military rival, has been putting pressure of its own on Chinese ties. It has forced some state-controlled Chinese companies in delist their US shares. On Thursday, the US Securities and Exchange Commission adopted rules that would require reluctant Chinese companies listed in the US to further open their books to American accounting firms or get kicked off its stock exchanges.
The attraction between China and Wall Street is increasingly one-sided. Wall Street banks like Goldman Sachs and JPMorgan Chase are hiring and investing heavily in building out their businesses in mainland China. Chinese regulators have loosened limits on what foreign banks can do inside the country, but the firms will still be subject to Chinese laws and mores.
China also has Hong Kong, which remains a financial capital despite Beijing’s tightening its grip over the government and daily life. Didi on Friday paved the way for allowing investors who bought shares on the New York exchange to swap them for those that will someday soon be traded in Hong Kong.
Didi’s move will put a focus on Chinese companies that still trade in the US, and they represent a lot of money. A congressional commission estimated this year that nearly 250 Chinese companies had a total of US$2.1 trillion in shares trading on US exchanges.
The most prominent is Alibaba, the e-commerce giant that once conducted the biggest IPO in the world when it sold shares in New York in 2014. The company didn’t immediately respond to a request for comment.
Chinese regulators were said to have been looking at ways to limit Chinese listings in the US. This week, they denied a report that they would close a legal loophole that Chinese companies like Didi and Alibaba have long used to list overseas while keeping corporate control in the mainland. But even without more regulatory action, few Chinese companies have listed in the US since Didi’s IPO and a subsequent regulatory crackdown on the company by Beijing.
There was a time when Wall Street’s bankers could lobby Washington on China’s behalf and get results. In the late 1990s, as China was trying to lower trade barriers, then Premier Zhu Rongji flew to New York to meet finance and business leaders. The heads of Goldman Sachs and American International Group later worked to persuade President Bill Clinton to strike a deal to help China join the World Trade Organisation in 2001.
Wall Street was also able to intervene when Presidents George W. Bush and Barack Obama considered labelling China a currency manipulator, urging lawmakers to reconsider taking official action against Beijing’s attempts to weaken its currency in order to boost its importers.
These days, calls from Wall Street executives like Blackstone’s Stephen A. Schwarzman, who has raised over US$500 million for a scholarship programme at China’s prestigious Tsinghua University, have increasingly fallen on deaf ears in Washington. In 2019, the Trump administration labelled China a currency manipulator. The designation was later formally removed, but the sentiment of getting tough on China has remained.
As the US-Chinese relationship cools, more companies like Didi will get caught in the middle.
“It’s bad for business to be caught between two superpowers flexing their economic and regulatory powers,” said Mr Paul Leder, a lawyer at Miller & Chevalier and a former director of the SEC’s Office of International Affairs.
The delisting is likely to increase investor concerns about what seems to be a growing hostility by Chinese officials toward domestic companies that list shares on overseas exchanges.