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Beijing seeks to ease fears on Wall Street after tech crackdown

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China’s securities regulators have sought to alleviate concerns among international investors and banks after stricter new regulations on private education companies have shocked the market.

Beijing regulators called global investors, Wall Street banks, and executives of the Chinese financial group on Wednesday night, according to three people familiar with the matter. One said there were about 12 participants, including BlackRock, Fidelity, Goldman Sachs, and JP Morgan executives.

The call aimed to reassure the group after China effectively banned the country’s $ 100 billion tutoring industry over the weekend.

The news of the call pushed up Chinese stocks suffering a week of punishment in a regulatory slate. Shares of Hong Kong-listed internet groups Tencent and Alibaba surged 8.4% and 6.7%, respectively, as the broader Hang Seng Tech index rose 7%.

The CSI300 index for China’s Shanghai and Shenzhen listed stocks rose 1.5%, while the technology-focused ChiNext index rose 3.7%.

One person, who was briefed on a phone call hosted by the China Securities Regulatory Commission, showed that the Chinese government did not “completely listen to the sentiment of international investors,” but concerns about future regulatory policies. He added that it wasn’t very helpful in relieving.

“These policies aren’t from the CSRC, they’re from a much higher level. It’s clear that more will happen in the future, and it’s clear to everyone,” he said.

During the call, CSRC Vice-Chairman Fang Xinghai told an international group that China has promised to allow companies access to capital markets, saying that actions on the education technology business are isolated. ..

He said many asked the CSRC whether regulators would cover the “variable interest entity” structure that many large Chinese technology groups used to list overseas. .. But the question wasn’t answered clearly, he said.

The crackdown on tutoring companies included a limitation on the ability to use the VIE structure. It is also used by technology companies such as Alibaba and Pinduoduo to list in the United States. This structure, which is not legally permitted in China, allows global investors to circumvent the control of foreign ownership in some Chinese industries.

Latest restrictions on tutoring groups Prompted worry Its regulators can target the structure more broadly.

Fang said he wasn’t interested in talking to journalists when he was contacted by the Financial Times.

“We didn’t expect this policy to have such a big impact on investor sentiment,” said one person close to the CSRC. [are] I want to send a message that it is a business as usual. .. .. However, everyone felt that there were too many crackdowns and there were no regulatory boundaries. Investors will need to revise the price of risk in China in the future. “

Regulatory pressure from Beijing on technology groups has increased rapidly over the past month. Authorities have begun reviewing how Chinese companies are listed abroad, and national cybersecurity regulators plan to consider listing all overseas for groups with more than one million users for national security reasons. Was announced.

The new cybersecurity rules were announced days after ride-haling app Didi Chuxing raised $ 4.4 billion in an initial public offering in New York last month. Since then, its share has fallen by 40 percent.

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Tencent further surprised the market on Tuesday by announcing the suspension of user registration for its flagship WeChat app, upgrading its security technology to “match all relevant laws and regulations.”

Chinese mass media have sought to reassure investors following the plunge in shares in Shanghai and Shenzhen. A Wednesday article by Xinhua said the CSRC maintains an “open attitude” regarding the places listed by Chinese companies.

BlackRock, Fidelity, and JPMorgan did not immediately respond to requests for comment. Goldman Sachs declined to comment.

Additional Report by Edward White and Ryan McMorrow

Beijing seeks to ease fears on Wall Street after tech crackdown Source link Beijing seeks to ease fears on Wall Street after tech crackdown

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