Where Have All the Chinese I.P.O.s Gone?

There was a time when a Chinese internet company’s initial public offering was the hottest thing on Wall Street.

As the e-commerce giant Alibaba prepared to go public on the New York Stock Exchange a decade ago, the world’s biggest banks competed fiercely to underwrite the offering. When the opening bell rang on Sept. 19, 2014, stock traders cheered, wearing hoodies in Alibaba’s signature orange over their suits. The I.P.O. raised $25 billion, the biggest listing ever at the time. Scores of other Chinese companies raised billions in the United States over the next few years.

Those days are firmly in the past. Wall Street has not seen anything close to a blockbuster Chinese I.P.O. in three years. In fact, the drought is getting worse. So far this year, Chinese companies have raised about $580 million in U.S. listings, almost all of it last month from one I.P.O. by the electric vehicle maker Zeekr.

As the geopolitical relationship between China and the United States has deteriorated, it has become increasingly difficult for Chinese companies to find a foreign market where a listing might not be jeopardized by political scrutiny.

Things are hardly looking better in China. As part of a push by Beijing to assert greater control over the Chinese market, regulators have made it harder to go public, drastically slowing the pace of domestic listings. Around 40 Chinese companies have gone public at home this year. They have raised less than $3 billion, a fraction of the value typically raised by this point in the year, according to data from Dealogic.

If the current pace continues, this year will bring the fewest Chinese initial public offerings worldwide in more than a decade.

The slowdown is a major shift from a period when multibillion-dollar listings by Chinese tech companies helped fuel a Gilded Age of private business in China. The former bounty in public listings reshaped how start-ups raised money, attracting more private capital from outside China while allowing foreign and domestic investors to move money out of the country.

The shift shows how China’s top leader, Xi Jinping, has remade private business, bringing it firmly under government and Chinese Communist Party control. Officials have forced successful companies off the public stock markets, jailed entrepreneurs and abruptly barred booming industries from making profits.

“A lot of these uses of capital that were going through the private sector and the stock market were a potential risk to the party’s influence,” said Andrew Collier, managing director of Orient Capital, an economic research firm in Hong Kong.

The uncertainty generated by Mr. Xi’s crackdown has wiped billions of dollars in value from China’s tech industry and prompted U.S. venture capital firms to sharply roll back their investments in China.

At the same time, Chinese companies are uncertain about the scrutiny they could face if they try to go public in the United States as tensions escalate between Washington and Beijing. “Nobody really wants to test the waters,” said Murong Yang, managing director at Future Capital Discovery Fund in Beijing.

In February, after reports that Shein, the Chinese-founded online shopping company, sought to go public in the United States, Senator Marco Rubio urged the head of the Securities and Exchange Commission to block the listing if the company refused to share information about ties to the Chinese government.

“The market a Chinese company chooses to list in today is influenced by factors in addition to its fundamental business value — it’s a product of geopolitical considerations,” said Linda Yu, a U.S.-based investor who previously worked with SoftBank, the Japanese technology giant, and Warburg Pincus to invest in China.

Four or five years ago, a successful Chinese company with a hold on a big market was a promising candidate to sell stock. “The question asked at the time was ‘Why haven’t you listed abroad yet?’” Ms. Yu said. “But now it has flipped to ‘Why would you?’”

Most of the Chinese companies currently listed on U.S. stock exchanges went public between 2018 and 2021, when investors scrambled for stakes in start-ups like Full Truck Alliance, whose apps connect freight customers and truck drivers, and Kanzhun, which runs a job-hunting platform.

The boom years ended midway through 2021 when the Chinese ride-hailing company Didi Chuxing went public on the New York Stock Exchange without a green light from Chinese regulators. At the time, Didi had more customers in China than Uber had in the rest of the world. Two days after it went public, authorities in China forced Didi to stop registering new users and to undergo a cybersecurity review over concerns that the listing could mean the company would have to transfer data about Chinese people to the United States.

Within six months, Didi had taken steps to delist, or remove itself from the stock market. No Chinese company has tried such a high-profile listing on an overseas stock exchange since, and Chinese regulators have made stricter standards for companies looking to do so. This year, Alibaba called off a plan to spin off one of its business units, focused on logistics, through a Hong Kong listing.

Private businesses in China have long had to figure out how to operate without being crushed by the authorities.

China’s main stock exchanges in Shanghai and Shenzhen were established in the early 1990s as part of reforms that transformed China’s economy, but public offerings were mostly limited to companies controlled by the state.

Between 2011 and 2018, China had about the same number of I.P.O.s as the United States. In 2019, China launched the Star Market in Shanghai to encourage tech companies to go public there. But Chinese investors and company founders preferred to list in New York if they could.

Since Didi delisted, Beijing has made it clear that the power and the profits of China’s private industry should be directed toward the country’s push for technological self-reliance. Investment has poured into cutting-edge fields like semiconductors, artificial intelligence and data centers. In May, the government registered a $47.5 billion fund dedicated to semiconductor development, sending a signal to entrepreneurs and investors that while some industries may be riskier bets, these have the seal of approval.

In April, Beijing released a plan outlining higher standards for companies that want to go public, including more disclosures and closer oversight.

At least 100 companies have withdrawn plans to list this year on exchanges in Beijing, Shanghai and Shenzhen, according to the regulator’s public records. Venture capital investment is at its lowest point in four years.

“China’s securities regulator has been traditionally draconian when it comes to letting companies list — and this plan is even tighter,” Mr. Collier said. “A lot of companies are worried about listing in China or feel they can’t squeeze themselves through the eye of the needle.”

John Liu contributed research from Seoul.