Amidst the commercial cold war with China, US banks have had no participation in the 109 initial public offerings on the Chinese stock market this year, marking a record low in international banks’ involvement, according to recent reports.

Technology is not the only front in the commercial cold war with China. 109 initial public offerings have taken place on the Chinese stock market so far this year. How many listings have US banks participated in? Zero. Zilch. Zippo. The Financial Times reported this weekend that, according to Dealogic statistics going back to 2009, the overall participation of international banks in Chinese IPOs had reached its lowest level ever.

Jake, forget it, the market is in China

Siloing has persisted for years. Dealogic reports that foreign institutions have raised 1.2% of $26 billion, or $300 million. This is far below 2019’s nearly 50% participation rate and 2018’s 3.1% rate, the third-lowest since 2009. International banks had over 50% listing activity in 2009. “This is the environment that Xi Jinping has created,” said Financial Times freelance analyst Fraser Howie.

International instability is only partially to blame. “[It] might simply be simpler for an issuer to deal with Chinese bookrunners and not have a foreign bank,” adds the author. Foreign banks need different licenses for different industries. Zero-covid restrictions also contributed to the three-year decline. Compliance is just one element contributing to China’s IPO market’s exclusivity:

  • Chinese listings rely more on individual investors than institutional investors, unlike most US and international banks. “The business model that the Western banks run, where you sell [shares] to the same 100 or so investors every time, doesn’t work,” a top official from a multinational bank’s Asian investment office told the Financial Times, requesting anonymity.
  • According to bankers, lack of due diligence is another cause. The top 50 clients of a company might be contacted by Western banks prior to an IPO, but this practice is less common in China.

Unsocial Networks: Geopolitical instability isn’t keeping Western banks out of China, but it’s blocking Big Tech. Google, Microsoft, and OpenAI have blocked access to their new AI chatbots in Hong Kong to avoid accidentally breaking the new pro-CCP national security regulations. Meanwhile, a legal dispute over YouTube’s banning of a popular pro-democracy song could revolutionize how Western media and tech companies reach Hong Kong and Taiwan. Break things quickly—except totalitarian laws that limit expression.

China bans foreign banks from its initial public offering market
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