The undeclared Cold War between the United States and China is not confined to security matters, to South China Sea, to Taiwan and to domination in Indo-Pacific. It has spilled over into trade matters. This was inevitable. The US Securities and Exchange Commission has said that Chinese companies which want to offer the initial public offerings (IPOs) in the American markets must reveal more about the risk aspect of the companies.

As a rule, it is a fair demand. But usually, new companies that go to market to sell shares and raise funds reveal only the general aspects. If too much of the risks involved are to be disclosed, then the IPO might not take off. It is believed that the companies offering IPOs do not set out to deceive investors, and the implied risks are those that go with any new venture. But the SEC has taken a stricter view in the matter because it involved Chinese companies, and even the private Chinese companies are subjected to surveillance by the Chinese authorities, which violates the general spirit of the open markets.

The prickly situation arises from Chinese technology mobility company Didi, which includes hailing taxis among other things, had listed on the New York Stock Exchange (NYSE) on June 30 and raised US$4.4 billion through its IPO. The Chinese authorities have clamped down on the company, asking it not to expand its services for reasons of national interest and public interest.

The investigation has been launched by Cyberspace Administration of China (CAC), and this led to loss in share price of Didi in the American market. The company has said that it was cooperating with the Chinese authorities, and it denied that it was planning to delist. Didi’s IPO is considered the biggest by a Chinese company since 2014.

In response to the SEC directive about risk disclosure by Chinese companies, the China Securities Regulatory Commission has sought better communication between the two market regulators to resolve the problem. The CSRC in a statement has also assured that the Chinese financial markets will be opened up and assured that the Chinese markets are healthy, predictable and sustainable.

In the old Cold War between the US and the Soviet Union, there was no scope of the kind of economic confrontation that we are witnessing between the US and China. The Soviet Union, which was an entirely a state-run economy did not provide any scope for Russian private or government companies to compete with the American companies in the American markets. China though officially a communist state which subscribes to the credo of “socialism with Chinese characteristics” and which has followed economic liberalisation relentlessly since Deng Xiaoping ushered in the change in 1979, is giving the dollar the run for its money in the market.

Americans have welcomed China opening its economy and American companies have rushed to China. But in the last few years, with China adopting a more aggressive policy at home and abroad under President Xi Jinping, Americans have turned wary and suspicious. They now believe that China under Xi is the new ideological rival if not an enemy. So, the new Cold War between the US and China will not be fought only in terms of increasing each other’s military prowess, but also in the global markets. China has embraced the economy with as much passion as it did communism under Mao Zedong more than 70 years ago.

American strategists are trying to make sense of this Chinese puzzle where the Chinese are challenging the Americans on economic grounds. And it appears that the Chinese are only too ready to negotiate with the Americans even as they remain inflexible on the security matters.