Market booms in New York and Hong Kong typically draw smart capital from a wide range of global investors. In contrast, Xi Jinping’s big bang appears painfully insular
universe CloudWalk might have raised hundreds of millions of dollars in Hong Kong or New York. The firm is one of the world’s leading facial-recognition outfits: its technology can recognise people in milliseconds with astonishing accuracy. But modern geopolitics pushed it in another direction. America has sanctioned the firm for alleged human-rights violations, owing to reputed links with China’s military.
Meanwhile, China’s regulatory regime has become more friendly. Not long ago, onerous reviews were required for new listings. This led to a backlog, sometimes stretching to thousands of firms, and prevented private-equity investors from exiting investments. A new system, trialled in theand ChiNext exchanges, will be rolled out to others later this year. It is more in line with international standards, setting requirements for listings, but dropping the arduous inspections.
The use of state money to direct private investment is an approach that has spread from private to public markets. Between 2015 and 2021 government-backed private-equity outfits raised more than 7trn yuan. A company that takes state capital in its early stages becomes more attractive to private investors later on, since it indicates that the firm fits with the offical vision of innovation.
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