‘Is China Risk Over?’ US-Listed Chinese Companies See Biggest Surge in 13 Years

[Asia Economy Reporter Yujin Cho] The stock prices of Chinese companies listed in the U.S., which had plummeted this year due to intense regulations from both the U.S. and China, surged by the largest margin in 13 years. However, as Chinese authorities continue to expand anti-market regulations, including restrictions on overseas listings of domestic companies, opinions are divided on whether this short-term rise will lead to a sustained upward trend.

According to Bloomberg on the 30th (local time), the Nasdaq Golden Dragon China Index, composed of Chinese companies listed on the U.S. stock market, jumped 9.4% that day. This was the largest daily increase in 13 years since 2008.

Alibaba, a Chinese e-commerce company that became the top target of Chinese authorities and saw its stock price plunge, and TAL Education, a Chinese online education company, led the upward trend. Their stocks rose 9.7% and 15%, respectively, on that day. The stock price of Nio, a Chinese electric vehicle company listed on the New York Stock Exchange (NYSE), also surged 15% that day.

Alibaba's stock price was halved (47%) from $232.73 at the beginning of the year to $122.99 (closing price on that day) due to successive regulations by the authorities. TAL Education also plummeted 94% this year from $71.51 at the start of the year to $3.944 amid crackdowns on private education.

The Chinese government has tightened regulations on Chinese companies citing national security and public welfare, while the U.S. government has done so citing the risk of investor harm due to opaque accounting. The Chinese government imposed comprehensive regulations on sectors such as e-commerce, gaming, real estate, and private education, causing significant damage. Meanwhile, the U.S. increased disclosure requirements for Variable Interest Entities (VIEs) and introduced new regulations to block the risk of Chinese authorities interfering with the security policies of their domestic companies, thereby intensifying regulatory pressure.

As a result, cases of companies giving up on entering the New York stock market or voluntarily delisting have surged. Notably, Didi Chuxing, a major target of Chinese authorities' regulation alongside Alibaba, could not withstand the pressure from the Chinese government and decided to voluntarily delist from the New York Stock Exchange earlier this month, just six months after its listing.

This led to continued poor performance. According to the earnings data Didi Chuxing released for the first time since its New York listing, the company's third-quarter revenue was 42.675 billion yuan (approximately 7.962 trillion KRW), down 11.48% from the previous quarter, and the adjusted net loss was 7.5 billion yuan (approximately 1.399 trillion KRW), more than triple the previous quarter's 2.3 billion yuan. The revenue decline was due to a more than 10% decrease in revenue from Didi Chuxing's core business, ride-sharing services, in China compared to the previous quarter.

Meanwhile, experts are divided on whether this short-term rise will lead to a sustained upward trend. Vital Knowledge, a financial information company, said, "Now is the time to buy Chinese stocks," adding that "the Nasdaq Golden Dragon China Index has returned to the solid support level it had before the regulatory issues from Chinese authorities arose."

There are also cautious views. Given that China is expanding the scope of regulations under the pretext of national security and improving public welfare, and that the intensifying U.S.-China conflict negatively affects the future stock price direction of Chinese companies listed in the U.S., some experts remain wary. Matt Marley, chief analyst at U.S. asset management firm Miller Tabak, pointed out, "While the Santa rally trend may continue until early next year, allowing the stock prices of Chinese companies listed in the U.S. to maintain an upward trend, regulatory uncertainties remain significant, making it difficult to shift to a proactive buying stance."

This content was produced with the assistance of AI translation services.