Analysis-Chinese firms set for record US listings, undeterred by geopolitics

Chinese companies are increasingly pursuing U.S. listings, with a record number in 2024 and H1 2025, driven by more stringent domestic listing rules and the appeal of deeper U.S. capital markets and better valuations, often leveraging SPACs for quicker access. This trend continues despite U.S. lawmakers' national security concerns and increased SEC scrutiny on disclosure, underscoring the U.S. market's persistent attractiveness for Chinese firms, including pre-profit startups, seeking more accessible funding.

Analysis

A significant trend is underway as a record number of Chinese companies pursue U.S. listings, driven by a confluence of domestic constraints and foreign market appeal. In 2024, a record 64 Chinese firms went public in the U.S., a pace that continues with 36 listings in the first half of 2025 and over 40 more in the Nasdaq pipeline. This surge is primarily fueled by China's tightened domestic listing rules from 2023, which impose high profitability or strategic alignment thresholds and a lengthy 9-to-12-month approval process, rendering a domestic IPO a 'mission impossible' for many startups. In contrast, the U.S. offers a deeper capital pool, a quicker 4-to-6-month path to listing, and more objective criteria. The use of Special Purpose Acquisition Companies (SPACs) has become a key facilitator, with 76 Chinese firms utilizing this route so far this year to gain faster market access, often for pre-profit or pre-revenue technology ventures. This capital-seeking migration persists despite escalating geopolitical headwinds, including calls from U.S. lawmakers for delisting Chinese firms over national security and a June move by the SEC to heighten disclosure requirements, creating a clear tension between market opportunity and regulatory risk.

Key Decisions for Investors

• Investors should assess the growing pipeline of Chinese IPOs and SPACs as a distinct opportunity set, particularly for exposure to small and mid-cap technology firms that are unable to meet China's stringent domestic listing criteria.
• Positions in all U.S.-listed Chinese equities, from new listings to established firms like Alibaba and Baidu, carry elevated regulatory and geopolitical risk; it is crucial to monitor for new SEC disclosure rules or legislative actions that could impact trading liquidity and valuations.
• Given the prevalence of pre-profit startups listing via SPACs, conducting enhanced due diligence on the fundamental business models and corporate governance of these new entrants is critical, as the accelerated listing process may lack the rigor of a traditional IPO.
• The post-listing performance of recent large IPOs, such as the $411 million offering from Chagee, serves as a key bellwether for market sentiment and should be watched closely to gauge investor appetite for Chinese equities amid ongoing Sino-U.S. friction.