While the company is not on a separate list from the Treasury Department of Chinese military-affiliated companies that U.S. investors are not allowed to invest in, it may happen soon, says Stephen Myrow, a former Treasury official who is now Beacon’s CEO of Political Advisers. Leaving the company on the second list, Myrow says, could increase the perception of a possible loophole. If it is placed on the Treasury List, U.S. investors will not be allowed to own even Hong Kong shares.

SenseTime, whose investors are SoftBank, the IPO application comes as Chinese regulators tighten controls on companies, especially sensitive information. This raises other questions, such as whether Chinese regulators gave their blessing as Beijing tries to attract more Chinese technology companies to list in Hong Kong.

SenseTime declined to comment on the application, adding that, as the company had previously stated, it was “deeply disappointed” by the decision of the Department of Commerce’s Industry and Safety Agency and “is working closely with related parties to resolve the situation.”

“Investors are pressuring them to make a listing, but they have a much more complex regulatory environment than a year ago,” says Paul Triolo, who leads global technology policy at Eurasia Group, and believes the company is likely to have made progress from regulators. “But the valuation is really high, given the company’s profitability and the constraints on how much it can expand beyond China.”

In mid-May, The Wall Street Journal reported that the company tested a $ 1 billion bid on the waters. But much has changed in recent months as Beijing’s regulatory power has tightened.

Beijing is increasingly focused on reducing its dependence on the United States and others – and one way it is doing so is to strengthen its own capital markets and attract more companies to list in Hong Kong. This effort has been aided by the increasing control of Chinese companies in the United States and the chaos that followed the public offering.

Didi Global

(ticker: DIDI), whose shares rose after its U.S. debut when Chinese regulators launched an investigation.

The sharp sale of Chinese shares has also cooled investor interest with new regulatory measures. In Beijing, for example, online video games a week were just banned for those under the age of 18, limiting their access to games to only three hours a week on weekends and public holidays.

Tencent Holdings

(700 Hong Kong) had prevented some restrictions, although the ban is even stricter. Minors make up a small portion of Tencent’s gaming revenue. Tencent shares closed slightly overnight at HK $ 465.80, but NetEase (NTES) shares fell 3.5% to $ 89.56 on Monday.

The measures are part of a wider regulation aimed at creating a more level playing field and better data control, but also a broader objective focusing on the social issues and equality that money managers are trying to address. For this reason, some money managers channel investors with a strong focus on the environment, society, and governance factors. “We’re paying more attention to the social impact and risks of companies,” says Pradipta Chakrabortty, treasurer at Harding Loevner.

This does not mean that there are no risks, and Chakrabortty points out that it is not clear how the rules could affect the dynamics of the industry and the near-term outlook for companies like Tencent. But that’s not enough to stop him from hunting in China.

“China is a big market, not only from consumption, but also from the value chains of component manufacturing. There are attractive companies with significant growth potential at a turning point towards even greater growth, ”he says.

However, capitalizing on growth requires a strong stomach for regulation to continue.

Write to Reshma Kapadia at [email protected]

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