China Roundup: A blow to US-listed Chinese firms and TikTok’s new global face
Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. It’s been a tumultuous week for Chinese tech firms abroad: Huawei’s mounting pressure from the U.S., a big blow to U.S.-listed Chinese firms, and TikTok’s high-profile new boss.
China tech abroad
Over the years, American investors have been pumping billions of dollars into Chinese firms listed in the U.S., from giants like Alibaba and Baidu to emerging players like Pinduoduo and Bilibili. That could change soon with the Holding Foreign Companies Accountable Act, a new bill passed this week with bipartisan support to tighten accounting standards on foreign companies, with the obvious target being China.
“For too long, Chinese companies have disregarded U.S. reporting standards, misleading our investors. Publicly listed companies should all be held to the same standards, and this bill makes commonsense changes to level the playing field and give investors the transparency they need to make informed decisions,” said Senator Chris Van Hollen who introduced the legislation.
Here’s what the legislation is about:
1) Foreign companies that are out of compliance with the Public Company Accounting Oversight Board for three years in a row will be delisted from U.S. stock exchanges.
PCAOB, which was set up in 2002 as a private-sector nonprofit corporation overseen by the SEC, is meant to inspect audits of foreign firms listed in the U.S. to prevent fraud and wrongdoing.
The rule has not sat well with foreign accounting firms and their local regulators, so over time PCAOB has negotiated multiple agreements with foreign counterparts that allowed it to perform audit inspections. China is one of the few countries that has not been cooperating with the PCAOB.
2) The bill will also require public companies in the U.S. to disclose whether they are owned or controlled by a foreign government, including China’s communist government.
The question now is whether we will see Chinese companies give in to the new rules or relocate to bourses outside the U.S.
The Chinese firms still have a three-year window to figure things out, but they are getting more scrutiny already. Most recently, Nasdaq announced to delist Luckin, the Chinese coffee challenger that admitted to fabricating $310 million in sales.
Those that do choose to leave the U.S. will probably find a warmer welcome in Hong Kong, attracting investors closer to home who are more acquainted with their businesses. Alibaba, for instance, already completed a secondary listing in Hong Kong last year as the city began letting investors buy dual-class shares, a condition that initially prompted many Chinese internet firms to go public in the U.S.
The long-awaited announcement is here: TikTok has picked its new chief executive, and taking the helm is Disney’s former head of video streaming, Kevin Mayer.
It’s understandable that TikTok would want a global face for its fast-growing global app, which has come under scrutiny from foreign governments over concerns of its data practices and Beijing’s possible influence.
Curiously, Mayer will also take on the role of the chief operating officer of parent company ByteDance . A closer look at the company announcement reveals nuances in the appointment: Kelly Zhang and Lidong Zhang will continue to lead ByteDance China as its chief executive officer and chairman respectively, reporting directly to ByteDance’s founder and global CEO Yiming Zhang, as industry analyst Matthew Brennan acutely pointed out. That means ByteDance’s China businesses Douyin and Today’s Headlines, the cash cows of the firm, will remain within the purview of the two Chinese executives, not Mayer.
Huawei is in limbo after the U.S. slapped more curbs on the Chinese telecoms equipment giant, restricting its ability to procure chips from foreign foundries that use American technologies. The company called the rule “arbitrary and pernicious,” while it admitted that the attack would impact its business.
As Huawei faces pressure abroad due to the Android ban, other Chinese phone makers have been steadily making headway across the world. One of them is Oppo, which just announced a partnership with Vodafone to bring its smartphones to the mobile carrier’s European markets.
The U.S. has extended sanctions to more Chinese tech firms to include CloudWalk, which focuses on developing facial recognition technology. This means all of the “four dragons of computer vision” in China, as the local tech circle collectively calls CloudWalk, SenseTime, Megvii and Yitu, have landed on the U.S. entity list.
China tech back home
China has a new master plan to invest $1.4 trillion in everything from AI to 5G in what it dubs the “new infrastructure” initiative.
The smartwatch maker is eyeing a transparent, self-disinfecting mask, becoming the latest Chinese tech firm to jump on the bandwagon to develop virus-fighting tech.
The TikTok parent bankrolled financial AI startup Lingxi with $6.2 million, marking one of its first investments for purely monetary returns rather than for an immediate strategic purpose.
The once-obscure video site for anime fans is now in the mainstream with a whopping 172 million monthly user base.
It’s part of the smartphone giant’s plan to conquer the world of smart home devices and wearables.
Like Amazon, Alibaba has a big ambition in the internet of things.