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Some Chinese firms are unfazed by worsening U.S. relations. A fintech unicorn’s IPO is the latest proof

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Chinese financial technology firm Lufax last week filed for an initial public offering on the New York Stock Exchange in what could be the largest Chinese company IPO on a U.S. exchange so far this year.

Lufax didn’t say when it will list or how much it aims to raise, but the Wall Street Journal reports that the firm plans to list by the end of the month and raise around $3 billion.

Shanghai-based research firm Hurun Report ranked Lufax, an online wealth-management and lending platform backed by Chinese insurance giant Ping An, the fourth-most valuable unicorn in the world in 2020 with an estimated $38 billion valuation.

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Lufax raked in $3.6 billion in revenue and $1 billion in profit in the first six months of 2020, according to its filing document to the U.S. Securities and Exchange Commission. Its client base includes China’s fast-growing affluent middle-class, many of whom have a budding interest in personalized investment and who are accessible to Lufax through Ping An and its 210 million financial services customers, the filing says.

Lufax is the latest Chinese company to pursue a U.S. listing as U.S.-China political tensions rise and Chinese companies listed on U.S. bourses face more regulatory risks.

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Despite those headwinds, the U.S. market “remain[s] one of the top IPO destinations for Chinese companies,” said Bruce Pang, head of macro and strategy research at China Renaissance, an investment bank. Chinese companies still see the U.S. as a highly liquid listing venue that can boost a firm’s attractiveness to investors and help it achieve a higher valuation, Pang said.

In fact, Chinese companies have raised $9 billion in U.S. IPOs in 2020 to date, compared to $3.5 billion in 2019, according to Dealogic.

“Listing in the U.S. is … kind of the landmark. It’s too juicy to be lost,” said Alicia Garcia-Herrero, chief economist for Asia-Pacific at investment bank Natixis. Unless the U.S. makes listing on its exchanges prohibitively difficult, Garcia-Herrero said, many Chinese companies “will still try, until the very last day,” to land on a U.S. exchange.

At the same time, a counter trend exists in which U.S.-listed Chinese firms are distancing themselves from the U.S. by pursuing go-private deals and secondary listings closer to home.

Four of the five biggest Chinese IPOs of 2020 were either the debut of a firm that delisted from the U.S. or the secondary listings of Chinese firms already trading in the U.S. For instance, two Nasdaq-listed Chinese companies—JD.com and NetEase—raised $4.4 billion and $3.1 billion, respectively, in secondary offerings in Hong Kong in June.

The Trump administration has aimed its recent scrutiny of Chinese firms almost exclusively at large, globally-prominent companies. For instance, the Trump administration has gone after ByteDance-owned TikTok, the first Chinese app to go mainstream in the U.S. market. The administration has also attacked Huawei, the biggest smartphone maker in the world by sales, and SMIC, China’s leading chipmaker that’s key to Beijing’s goal of semiconductor self-reliance. And just last week, Bloomberg reported that the Trump administration is mulling restrictions on the digital payment services of Chinese fintech giant Ant Group and gaming conglomerate Tencent Holdings over national security concerns.

The administration’s tendency to go after big fish means U.S. markets remain appealing to Chinese firms that don’t fit that bill. Garcia-Herrero told Fortune last month that “big, iconic” Chinese tech companies were likely to avoid U.S markets, whereas smaller-profile firms still felt comfortable pursuing U.S. listings.

Ant Group was seemingly aware of the risks of a U.S. crackdown when it decided on Hong Kong and Shanghai—not American exchanges—for its upcoming IPO. In its Hong Kong stock exchange filing application, Ant cited “geopolitical tensions” and “regulatory challenges” as risk factors in markets outside China.

Analysts estimate Ant Group’s IPO could occur as soon as this month and raise around $35 billion, making it the biggest public offering in history.

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