If the U.S. rules force Chinese companies to delist from New York, Beijing will make it harder for them to raise money in public markets abroad.
New rules from the Cyberspace Administration of China require Chinese internet platform companies with personal data of more than 1 million users to get approval before listing overseas.
The rules do not apply to companies that have already gone public, according to a CNBC translation of a Chinese article.
It is another consideration for international investors to look at Chinese companies.
According to a CNBC translation of the Chinese remarks, the timetable for overseas listings has become longer and uncertainty has increased for listing.
As regulators and businesses figure out how the new measures will be implemented, institutional investors hope to better understand the government's thinking by seeing some approvals for overseas listings.
Beijing increased scrutiny on Chinese companies looking to raise money in New York after Didi's U.S. IPO.
Chinese IPOs in the U.S. have dried up in the months since, while existing U.S.-listed Chinese stocks face the threat of delisting in coming years from Washington's more stringent audit requirements.
In the last few years, a number of Chinese companies have turned to Hong Kong for dual or secondary listings. In the event of a delisting, investors could swap their U.S. shares for ones in Hong Kong.
Bruce Pang and his team at China Renaissance said in January that only about 80 of 250 U.S.-listed Chinese companies would be eligible for a secondary or dual primary listing in Hong Kong. There are strict requirements in Hong Kong for minimum market capitalization and other factors.
The analysts said that the Chinese companies would likely only have the option of privatizing and then attempting a listing in the mainland A share market.
The mainland market is dominated by retail investors and less accessible to foreign investors.
The Hong Kong stock market doesn't compare with New York when it comes to trading volume and the price tech companies can get for their shares.
It's not clear what level of scrutiny will apply to future Chinese stock offerings in Hong Kong.
If the regulator identifies a national security risk related to the companies, they don't need the review, according to the global chair.
Ellis said that there is a different threshold required for listings outside of China in markets such as London or Singapore. There are companies with personal data on more than one.
Before going public, a million users would need approval from the CAC.
She said that the latest statements from CAC just clarified a couple of matters and plugged up some potential loopholes.
The latest regulation does not mention Hong Kong.
The new overseas listings regulation does not mean that operators in the process of listing in Hong Kong can ignore the relevant network security, data security and national security risks.
The company was ordered to suspend new user registration and remove its app from app stores by the regulators after Didi's listing.
Didi said in December that it would delist from New York and relist in Hong Kong. The company hasn't said when that transition would occur or whether the review has ended.
The shares are down more than 12% so far this year, after a drop of more than 70% in the six months of 2021.
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