Chinese Private Firms Shift Focus Away from US while Singapore Establishes Crypto Regulations

Chinese private firms are avoiding the U.S. for overseas expansion, opting to keep it within the boundaries. Mergers and acquisitions & advanced technology in Southeast Asia, Europe, and Africa are their new focus.

Chinese Private Firms Refuse to Opt for U.S. Listings

A new survey has recently revealed that Chinese private firms are avoiding the United States for their expansion overseas, opting for a home listing instead of a U.S. initial public offering (IPO). The survey, conducted jointly by China’s Tsinghua University and Marcum Bernstein and Pinchuk LLP, brings into light the impact of the trade war on executive decision-making.

The survey questioned more than 1,200 business leaders across China, showing that 66% of the respondents see China as the most appealing location for a listing, with only 18.7% of the respondents inclined towards the U.S. market. Hong Kong is also ahead of the U.S. as a preferred IPO destination, at a time when the city is facing violent protests.

Chinese CEOs are still determined to expand globally despite trade tensions. They are shifting their focus away from the United States and directing their attention towards Southeast Asia, Europe, and Africa.

Drew Bernstein, who is the co-managing partner of MarcumBP, states that most executives are steering clear of the U.S. when considering their plans. Nevertheless, Bernstein anticipates that American investors will still be attracted to fast-growing Chinese tech unicorns, and numerous Chinese companies will still need access to the deep and highly liquid U.S. capital markets to secure funding.

The survey found that 71% of Chinese CEOs are willing to consider mergers and acquisitions as part of their growth strategy. Acquiring advanced technology was identified as the most important factor in such activities. Furthermore, the report highlights that Chinese CEOs have shifted their focus from the U.S. to Southeast Asia, Europe, and Africa for overseas expansion.

The survey, which was fielded at the start of the third quarter, found that 71% of Chinese CEOs are confident that leveraging on mergers and acquisitions is the best way to expand their share in the market.

U.S. politicians are calling for tighter scrutiny over Chinese investment and capital-raising, while Beijing is encouraging domestic listings by Chinese companies.

The U.S.-China Economic and Security Review Commission (USCC) presented a report to Congress last week, outlining measures to restrict U.S. capital flows towards Chinese companies. The report also highlighted the concerns of U.S. policymakers over sustained Chinese investment in cutting-edge sectors within the U.S.

These concerns have prompted USCC to recommend legislation that would prevent Chinese companies from issuing securities on U.S. stock exchanges if their disclosure is deemed inadequate and does not comply with U.S. regulations. This move is seen as an effort to ensure the reliability of the financial statements of Chinese companies and to maintain the integrity of U.S. financial markets.

Bernstein, however, believes that the proposal is not necessarily politically-driven. He stressed that the move would be an attempt to improve and ensure the reliability of financial statements from Chinese companies.

Singapore Banks Partner with Government to Establish Crypto Industry Standards

Singapore banks are teaming up with the country’s central bank and law enforcement to develop a standardized set of rules for verifying potential clients associated with the digital asset and cryptocurrency industry. The move is a response to the recent bankruptcies and scandals that have plagued the crypto industry.

The Monetary Authority of Singapore (MAS) has been partnering with the banks for the past six months to develop a comprehensive vetting process for clients related to the digital asset space. These banks will have to conduct customer due diligence to understand and manage the risks posed by clients.

The MAS and police are part of the banks-led working group on the project, but the client accepting process will depend on the risk appetite of every client.

A detailed report outlining the best practices surrounding the vetting process is expected to be published within the next two months. The report will cover Stablecoin, non-fungible tokens, and streaming credits.

Singapore aims to position itself as a center for cryptocurrencies and has prioritized implementing regulations that incentivize firms to set up their headquarters in the region. Stablecoin issuing companies Circle and Paxos have already received their licenses to operate in the country.

DBS Bank, the country’s biggest bank, has begun incorporating decentralized finance applications into its markets and has initiated a self-directed cryptocurrency trading platform for investors who meet the necessary criteria.

Although there has been significant volatility in crypto markets following the banking crisis, U.S. banks are still avoiding involvement in the crypto industry. While Singapore banks have chosen to collaborate with the government to establish consistent screening standards for potential customers operating in the crypto and digital asset sectors.

The new recommendations will not only cover firms that provide payment, trading, and transfer services but also stablecoins, non-fungible tokens (NFTs), and transferable gaming or streaming credits.

The guidelines presented will serve more as recommendations than regulations, and it will ultimately be up to the banks to decide whether to accept or decline a client based on their risk appetite.

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