By Amram Margalit – Leverate

Start-up companies that are valued over one billion USD are awarded the title of “unicorn”. They then gallop ahead in factors of 10—a decacorn is worth over 10 billion USD, and a hectocorn is valued at over 100 billion USD. The US might be the natural target for these mythical creatures, but with a trade war brewing between the two giant nations, Chinese unicorns are staying put.

As the trade war between the US and China keeps developing, Chinese unicorns have been requested by the Chinese government to stay at home rather than fly off to meet with wealthy US investors in Silicon Valley.

Ever since US President Donald Trump raised the specter of a trade war between the two giant nations, the channel of Chinese IPOs looking to raise cash in the US has run dry. One new Chinese IPO for e-commerce site Pinduoduo has attracted some attention, but it’s currently in a class of one, with nobody waiting in line. This new company, which is currently facing off with Alibaba and JD.com, is a natural fit for a US listing where it could compete against other e-commerce colossi.

So, where are Chinese IPOs headed? Well, Hong Kong! A UK colony for 150 years before returning to China in 1997, HK is currently enhancing its status as a financial hub. Chinese Apple-lookalike Xiaomi just raised 3.1 billion USD through an IPO, and there are at least two dozen more Chinese companies with something to say, looking to raise cash. In Hong Kong alone, the total value of IPOs exceeds 10 billion USD. With a shortage of hi-tech activity, Hong Kong has welcomed Chinese unicorns with open arms. And with only 10% of the Hang Seng index devoted to hi-tech, compared to 40% of hi-tech stocks in the S&P 500, the US-China trade war has produced an unexpected dividend for the island province.

US investors won’t be happy missing out on these Chinese IPOs. In recent years, Chinese stock releases have been extremely popular, and the Chinese government wasn’t too happy with this situation either. They could sense the Chinese middle class growing aggravation, as Chinese unicorns soaked up billions of US dollars, while US investors benefitted from the capital gains in their stocks.

But even with activity heating up in Hong Kong, Chinese American Deposit Receipts, or ADRs, are outperforming the Hong Kong market. Renaissance Holdings Limited, a Chinese investment bank that provides investment advice to the best and brightest Chinese tech companies, provides a good indication of the way future Chinese IPOs will develop. The bank is planning a listing in Hong Kong, targeting a valuation of 4 to 5 billion USD.

The drying up of Chinese unicorn business will do further damage to the relations between China and the US, and it’s not easy to see any good news ahead. Chinese start-ups will find investors for their ideas in other locations, and US investors will be left high and dry, wondering when this particular mess will sort itself out.

About the Author:

Amram Margalit is a professional writer who has worked in a wide range of settings, including technology companies, nonprofits, and the entertainment industry. Within these positions, Amram has provided quality content and advertising services and is currently the Content Manager at Leverate.