With its exit, Didi sends signal China no longer needs Wall St

The country has plenty of its own money and few problems attracting more from elsewhere

NEW YORK • The decades-long, trillion-dollar love affair between China and Wall Street is coming to an end.

Didi Chuxing, a US$39 billion (S$53.4 billion) company that is China's answer to Uber, said on Friday that it will 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 (IPO).

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 does not need it any more. 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 cannot 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 to delist their US shares.

On Thursday, the US Securities and Exchange Commission (SEC) 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 in 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 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 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.

Chinese regulators were said to have been looking at ways to limit Chinese listings in the US. Last 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.

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 towards domestic companies that list shares on overseas exchanges.

NYTIMES

Join ST's Telegram channel here and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Sunday Times on December 05, 2021, with the headline With its exit, Didi sends signal China no longer needs Wall St. Subscribe