U.S.-traded Chinese stocks dip on regulation concerns

July 6, 2021, 3:28 PM UTC

As U.S. investors bailed on Chinese ride-sharing service Didi on Tuesday, other Chinese companies that trade on American exchanges also took notable hits.

Didi Chuxing was down 23% in early trading Tuesday following news late Friday that new users in China would not be able to download the app while the government conducted a cybersecurity review of the company. It didn’t take long before the ripple effect hit a broader swath of firms.

Agriculture tech stock Pinduoduo was down almost 6% as of 10:30 a.m. ET. Tencent Music Entertainment fell more than 7% in early trading. Baidu was off nearly 5%. And JD.com fell over 4%.

Investor concerns centered around the Chinese government’s potential risk to these companies. The actions against Didi came less than a week after the company began trading on the New York Stock Exchange, driving prices to a 52-week low.

China has paid more attention to the country’s tech giants since last fall, when Alibaba founder Jack Ma gave a speech that appeared to criticize regulators. Ma soon mysteriously disappeared for two months. Shortly thereafter, Alibaba was subjected to a $2.8 billion fine from the government. (Investors, it should be noted, celebrated the company’s reaction to that fine—and Ma saw his personal fortune increase by almost as much as Alibaba paid the government.)

The fear is that increased clampdowns by the government could hurt innovation and slow long-term economic growth for the tech sector in China.

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