With US-China trade tensions mounting, Hangzhou-headquartered e-commerce juggernaut Alibaba is planning a secondary listing in Hong Kong that could raise it up to $20 billion, five years after successfully executing a record $25 billion float in New York.
That’s according to multiple sources, as reported by both Reuters and Bloomberg this morning, who say it would give the company a “war chest to keep investing in technology” funded by friendlier investors that are closer to home.
The report comes after IMF analysts warned that the latest trade war escalation “could significantly dent business and financial market sentiment, disrupt global supply chains, and jeopardize the projected recovery in global growth in 2019”.
Alibaba IPO: Plans Come Amid Escalating Trade War
Washington raised US tariffs to 25 percent on $200 billion of annual Chinese imports on May 10.
The decision will hit 5,745 Chinese goods including a sweeping range of foodstuffs, minerals, plastics and consumer electronics. Beijing’s retaliation will see new tariffs of between five and 25 percent on $60 billion of US imports, effective June 1.
The tension, along with the concerted pressure put by the Trump administration on Huawei, is beginning to have growing knock-on consequences of which the planned Alibaba IPO may be just one of the latest consequences: last week, Chinese chipmaker SMIC said it was delisting its New York shares in favor of focusing on its Hong Kong listing.
Hong Kong-based academics Andrew Sheng and Xiao Geng this week described the Trump administration’s trade war as a form of “tax subterfuge”.
Sheng, a former chairman of the Hong Kong Securities and Futures Commission, and Geng, President of the Hong Kong Institution for International Finance, wrote in Project Syndicate: “Historically, governments have addressed their excessive debts with tax increases, spending cuts, higher inflation (with negative real interest rates), or, in the case of the Roman Empire, conquest of creditors.”
“It seems to be politically impossible for the US government to raise taxes domestically. So the Trump administration has found a workaround: tariff increases end up serving effectively as consumption taxes, but because they can be blamed on foreigners, they are more palatable to the American public”.