ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
China tech

88 tech startups ditch China IPOs in 2021 as headwinds mount

Ant clampdown and US row lead companies to abandon Shanghai debuts

A gong at the Shanghai Stock Exchange: its startup-focused STAR market appears to be losing its shine amid growing domestic and overseas pressures on China's tech sector.   © Reuters

SHANGHAI -- Pressured by the ruling Communist Party at home and the U.S. administration abroad, Chinese startups have begun rethinking plans to go public in anticipation of further obstacles down the road.

The impact is especially pronounced on the Shanghai Stock Exchange's STAR market, where 88 companies, including some of China's most promising unicorns, have suspended or canceled planned initial public offerings over the first three and a half months of 2021.

The tech-focused board was founded in 2019 with firm backing from Chinese President Xi Jinping and has since grown into a key destination for China's tech-focused companies. But even as the number of IPOs worldwide reached a 25-year high in the January-March quarter, the STAR market has seen many more cancellations in recent months than in its entire first year and a half.

The government has been helping fast-growing companies secure funding to encourage innovation and to boost China's standing in its technological rivalry with the U.S. But it halted what would have been the world's largest-ever public offering by Ant Group in November as part of a growing crackdown on the country's biggest technology companies, shifting focus from promoting growth to strengthening the Communist Party's grip on the financial markets.

A unit of e-commerce company Alibaba Group Holding, Ant is one of two companies that dominate China's online payment market. Financial authorities said Monday that Ant will now restructure as a financial holding company supervised by the People's Bank of China, following their third meeting with company representatives.

The China Securities Regulatory Commission announced new rules in late January on new IPOs, including possible surprise inspections of companies that apply. The change allows the government to specifically target companies it deems problematic.

Authorities will take "vigorous" action against "sick" companies that try to force their way into an IPO, CSRC Chairman Yi Huiman said in March.

And Beijing's pressure tactics have worked.

Alibaba CEO Daniel Zhang said Monday that the company will actively cooperate with regulatory supervision. Alibaba shares rose 6.5% in Hong Kong that day on hopes that the comment, combined with a record 18 billion yuan ($2.75 billion) fine imposed Saturday, signals an end to its clash with regulators.

But increased government control could weigh on stock prices over the longer term. Unicorns backing out of IPO plans in February and March included Yitu Technology, which develops facial recognition technology, and Hesai Technology, which makes sensors for self-driving cars. Each has an estimated valuation of around $2 billion.

Yitu has officially explained that it needs more time to comply with stricter listing rules.

JD Technology, Alibaba rival JD.com's financial technology arm, also withdrew its IPO application, the Shanghai Stock Exchange announced April 2. JD Technology is involved in many of the same fields as Ant Group, such as consumer lending, and had been aiming to raise 20 billion yuan on the STAR market.

U.S. pressure on Chinese tech companies is also contributing to the chill. The U.S. last week blacklisted seven Chinese supercomputing companies and research institutions. There is speculation that the Biden administration could push Chinese technology startups to reshape their operations in the U.S.

Such concerns hang heavy over the STAR market as a whole. The STAR 50 index, tracking many of the board's biggest companies, has dropped almost 30% from its recent high last summer even as the MSCI ACWI Index, which tracks equities across the world, has continued to rise.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more