[Asia Economy Reporter Kim Suhwan] As the United States strengthens the review of stock listings of Chinese companies, China has announced that it will expand communication with the United States.
As Chinese authorities regulate their companies' overseas stock listings and consecutively crack down on IT and private education companies, increasing the 'China risk' in the global capital market, it appears that efforts are being made to 'calm market anxiety.'
According to Bloomberg on the 1st (local time), the China Securities Regulatory Commission (CSRC) stated in a press release that "the securities authorities of the two countries (China and the United States) should maintain a spirit of mutual respect, strengthen communication regarding regulations related to China-related stocks, and seek appropriate solutions to create sound policies and a healthy regulatory environment for financial markets."
The CSRC emphasized, "Because investments are intertwined in the capital markets of both countries, expanding cooperation between the securities authorities of the two countries is inevitable."
It added, "We will closely communicate with other countries' authorities to manage relationships with investors, companies, and regulatory agencies in the future, and to improve expectations and transparency of new regulatory policies."
The CSRC also reiterated its commitment to further opening the Chinese financial market and stated that the outlook for China's capital market is "predictable, sustainable, and healthy."
The issuance of such a statement by the CSRC is interpreted as reflecting concerns over the decline in stock prices of domestic companies triggered by regulatory pressure from Chinese authorities. Analysts suggest that the Chinese government is directly stepping in to soothe the anxieties of foreign investors.
Earlier, on the 30th of last month (local time), the U.S. Securities and Exchange Commission (SEC) announced measures requiring Chinese companies seeking to sell shares in the U.S. to disclose more information regarding potential risks.
The SEC specifically required Chinese companies listing shares of paper companies (nominal companies without substantial assets or business activities) to disclose the fact that they are paper companies and that actions by the Chinese government could affect financial performance.
The SEC's measures came amid Chinese authorities' restrictions on their companies' overseas stock listings.
On the 10th of last month, the Cyberspace Administration of China (CAC) mandated through a revised Internet Security Review Measures that internet service providers with over one million members must undergo cybersecurity reviews before overseas listings, making security reviews mandatory.
The threshold of one million members in China applies to almost all companies considering overseas listings, which is seen as effectively turning overseas listings of Chinese tech companies into a permit system.
Xu Zhenwei, an analyst at Natixis, a French financial company, pointed out that Chinese authorities' regulations on IT and private education companies caused the plunge in Chinese and Hong Kong stock markets.
He also forecasted that foreign investors would likely reconsider their strategies when considering investments in China.
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