For China’s business elites, staying out of politics is no longer an option

Internet infrastructure operators like Didi must prove their political and legal legitimacy to the government, Ma Changbo, founder of an online media company, wrote on his WeChat account on social media.

He wrote: “This is the second half of the separation between the United States and China.” “In the capital market, the playing-on-fence model is coming to an end.”

Didi, Ms. Liu, and Mr. Liu did not immediately respond to requests for comment.

Chinese internet companies have benefited from the best of both worlds since the 1990s. Many of them received funding from foreign ventures – e-commerce giant Alibaba was funded by Yahoo and SoftBank, while Tencent, another internet giant, was backed by South Africa’s Naspers. They also copied their business models from Silicon Valley companies.

Chinese companies gained further advantages when Beijing banned nearly all major US Internet companies from its home market, giving local players plenty of room to grow. Several Chinese internet companies later went public in New York, where investors have a greater appetite for innovative and risky startups than in Shanghai or Hong Kong. So far this year, more than 35 Chinese companies have gone public in the United States.

Didi’s campaign is now changing the calculus for many in China’s tech industry. One entrepreneur who set her sights on a New York listing to start her enterprise software venture said it would be difficult to go public in Hong Kong with a high valuation because what her company does — software as a service — is relatively new. idea in China.

A venture capitalist in Beijing added that due to China’s data security requirements, it is now unlikely that AI and software-as-a-service startups will consider going public in New York. Few people were willing to speak formally for fear of Beijing’s retaliation.

At the same time, the United States has become more hostile to Chinese tech companies and investors. Several investors said that as Washington ramped up its scrutiny of deals involving sensitive technologies, it became nearly impossible for Chinese venture firms to invest in Silicon Valley startups.