This year has not been a good year for US-listed, Beijing-based Chinese tech giants like Alibaba, Didi, Tencent, and, believe it or not, TikTok. The Chinese government started applying regulatory pressure on these companies earlier this year in an attempt to limit their economic power and tighten control over the data they possess.
Needless to say, this has given investors many misgivings about sticking with them and they have reacted predictably. Thanks to the antics of the Chinese government, many investors have withdrawn their investments.
And the China Securities Regulatory Commission also plans to fix a legal loophole that has allowed major Chinese companies, such as Alibaba and Tencent, to go public in the US for many years. This reform would require corporations under a specified corporate structure to get the consent of the government before listing their shares in the US or Hong Kong.
This could spark a massive migration of Chinese companies from the US back to China. And this will be a bigger deal than you think. A prime example to illustrate this is Tencent — the owner of Riot Games and maker of Honor of Kings, the world’s top-grossing game in 2019 and 2020.
Should this company be forced to leave the US market, it would take 40% investment stakes in Epic Games, makers of the supremely profitable online game Fortnite, and 5% investment stakes in Tesla. International investors damaged by the Chinese government’s hardline regulations have already lost more than $1 trillion this year and should the measures continue, up to $2 trillion in shares will be flowing from US markets to China.
Will these tech companies survive this exodus? And what effect will this have on the US economy and by extension that of the world?
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