As China continues to crack down on overseas-listed domestic technology companies, sentiments in the Chinese tech sector were down by 16% in the second quarter (Q2) of 2021 compared to the first quarter (Q1). ‘Geopolitics’ and ‘regulations’ were the top discussed agendas / themes in the filings* of Chinese tech firms during the period, finds the Filing Analytics Platform of GlobalData, a leading data and analytics company.

Rinaldo Pereira, Senior Business Fundamentals Analyst at GlobalData, comments: “The average word count of the ‘Risk’ section in Chinese companies’ filings rose by around 50% in Q2 2021 compared to the same quarter last year. ‘Asia-Pacific’ and ‘China’ have historically been top geography mentions for Chinese tech firms, which was not the case for Q2 2021. ‘North America’ and ‘the US’ were top geography mentions during the quarter- suggesting that firms are worried of heightened scrutiny.”

Mr Pereira adds: “It does seem that China’s sudden crackdown came as a surprise and is likely to impact the IPO announcements- with firms like ByteDance holding off announcements.”

Discussions around US listings were also down drastically in Q2 2021 compared to the same quarter last year. Companies are likely avoiding mentions of the US listings or already listed subsidiaries due to the risks of being under regulators’ radar from both countries.

David Bicknell, Principal Analyst of Thematic Team at GlobalData, believes that Chinese regulators are also likely to take a tough stance with the booming edtech sector, similar to its crackdown on other tech companies such as Alibaba and Tencent.

Mr Pereira concludes: “Chinese tech firms are not the only ones under the scanner of regulators. Several US tech giants have already faced the brunt of regulators across the globe. However, the negativity rate around regulations in H1 2021 was higher compared to H1 2020 for Chinese companies.”

*Annual Reports, Quarterly Reports and Earnings Transcripts