Xpeng President Says Firm Is Prepared To Meet New US, Chinese Regulations

The president of Chinese electric vehicle manufacturer Xpeng, Brian Gu, says his firm is on the “right side” of new regulations being enacted by Beijing.

For months, China has been enacting stricter new regulations on data privacy, cybersecurity and listings on foreign stock exchanges. Gu told CNBC that Xpeng, which is listed on the New York and Hong Kong stock exchanges, already possesses a “very robust organizational ... focus on data security” that kept it on the right side of Chinese regulators.

China’s crackdown on its tech titans has worried investors enough to wipe about half a trillion dollars in value off indexes that were invested in these firms. Some investment strategists have also begun to reconsider options away from mainland China to maximize their returns.

Gu explained his view that the Chinese government is not looking to undermine innovation with its regulatory blitz. He said that Beijing considers electric car companies to be a component of the country’s critical infrastructure, so it is not in their interest to gut their success.

“I think our industry actually is actually stated as industry that will be supported by the government. They see this as a critical infrastructure, as well as a critical component of growth for manufacturing, smart technology, and also carbon neutral agenda, which the government is pushing very hard,” Brian Gu, president of Xpeng, told CNBC in an interview on Friday.

China has issued specific guidelines for electric car companies because of the large amount of personal data their algorithms are generating. These measures will come into effect for companies like Xpeng on Oct. 1. According to the Ministry of Industry and Information Technology (MIIT), data that needs to be exported abroad must pass a security assessment.

Gu was also asked by CNBC about whether he also had any worries about the stricter scrutiny being applied by the U.S. Securities and Exchange Committee (SEC) to Chinese companies. Earlier in August, the SEC asked its staff to request more disclosures from Chinese companies looking to launch IPOs. This decision followed the travails of Chinese ridesharing company Didi Global, which was singled out by Chinese regulators over ostensible cybersecurity concerns right after it went public on the New York Stock Exchange (NYSE).

High-tech companies have become caught up in the growing competition between the U.S. and China in recent years, but the specific corporate structure used by Chinese firms looking to list abroad is the stated reason for U.S. concerns.

Known as a Variable Interest Entities, Chinese companies go public in the U.S. by establishing offshore shell companies away from China to apply for a listing. China does not allow direct foreign ownership in most cases.

There is also the possibility that the SEC can soon begin delisting Chinese companies from U.S. stock exchanges if they do not meet new financial disclosure requirements. According to a report by the Wall Street Journal, sources said that Chinese regulators are frustrated by what they see as a heavy handed approach by the SEC.

Gu said that Xpeng acknowledged the SEC’s change in position and it would be ready to meet any new requirements of it in the U.S. as well as China.

“In all our recent filings we got all the clearance we needed from the SEC, but going forward we will definitely beef up whatever disclosures are necessary in China or the U.S.,” he said.