TAIPEI (Taiwan News) — China’s new stock exchange in Beijing will likely accelerate the decoupling of financial markets between the U.S. and China, experts say.
Chinese President Xi Jinping (習近平) announced plans to establish the new exchange during a speech at the International Fair for Trade in Services in the Chinese capital, last Thursday (Sept. 2). The new bourse will focus on small- and medium-sized enterprises (SMEs) and be China's third major stock exchange — the other two being in Shanghai and Shenzhen.
The move is part of a broader trend toward a decoupling of the Chinese and U.S. financial markets, as governments of both countries take steps to restrict the access of Chinese companies to U.S. markets, according to analysts on the bourse by Sixth Tone.
In March, the U.S. Securities and Exchange Commission (SEC) adopted the Holding Foreign Companies Accountable Act — a law first passed by the former Trump administration that makes audits compulsory for all Chinese companies listed on American markets.
There are fears this could result in Chinese companies being delisted from U.S. exchanges since Chinese laws ban companies from handing over their accounting records to foreign regulators without first obtaining approval from Beijing.
Meanwhile, Beijing is encouraging companies to list on domestic markets, as regulators worry that transferring data abroad could create security risks. Experts say the Beijing Stock Exchange is an extension of this trend. Since it is set up to serve rapidly-growing SMEs, it will ensure the next wave of Chinese unicorns launch their IPOs at home.
“Technology is a main battlefield for big countries. Now, Chinese tech stocks are facing threats in the U.S., and China needs to provide an innovative capital market to encourage them to return,” Liu Ying (劉英), a researcher at the Chongyang Institute for Financial Studies of Renmin University, told Zheng Bang Think Tank. “The development of the Beijing Stock Exchange can help support financing for SMEs and drive their growth.”
Yvonne Yu from Rhodium Group said although the Beijing stock exchange was “not set up to absorb firms delisted from the U.S., financial decoupling with the U.S. did expedite the process of its establishment.” It is possible many firms currently listed in the U.S. will seek to be relisted in Hong Kong or other locations, given they are already mature companies, she added.