As 2025 winds down, two stories emerging from China's corporate world tell us something interesting about how money and rules intersect in today's geopolitical environment. On one hand, Hong Kong's stock exchange is experiencing a spectacular IPO boom. On the other, ZTE (0763.HK) is discovering that US regulators have very long memories and even longer reach.

Let's start with the good news, sort of. Through November, 86 companies raised $28.4 billion via Hong Kong IPOs this year. That's a genuinely impressive haul, and with more offerings queued up, the momentum looks set to carry into early 2026. But here's where things get interesting: the Hong Kong Stock Exchange and the Securities and Futures Commission just sent a joint letter to underwriters essentially saying, "Hey, the quality of these applications is slipping, and we need you to clean this up."

Now, before anyone panics, this isn't exactly breaking new ground. Regulators pulled a similar move years ago, before the pandemic, when they leaned on investment banks to be more accountable for the companies they brought to market. Think of this latest letter as a friendly but firm reminder to maintain standards now that the market has suddenly gotten hot again.

The underlying dynamics driving this IPO rush haven't changed much heading into 2026. Chinese companies need capital, desperately in some cases. For sectors that Beijing considers strategically important for national security, domestic markets are basically the only option. For everyone else, Hong Kong has become the default choice. The US route remains effectively blocked by what you might call a dual barrier: Beijing doesn't want to share sensitive economic data with American regulators, and Washington doesn't want US capital funding Chinese technology that could have military or surveillance applications.

There's also a herd mentality at work here. When companies in a particular sector list successfully and get decent valuations, their competitors scramble to follow suit. Nobody wants to be the company left sitting on the sidelines with a higher cost of capital, which quickly becomes a competitive disadvantage.

But there's a potential cloud on the horizon for Hong Kong's IPO parade. While 2025 saw relatively few blockbuster US listings, 2026 is shaping up differently. We're talking about potential mega-offerings like SpaceX, rumored to be planning a $30 billion IPO, and OpenAI. Unless something goes sideways in American markets, this surge in US capital demand could siphon liquidity away from Hong Kong.

The ZTE Saga Continues

Now let's talk about ZTE, the telecommunications equipment maker often considered Huawei's little brother. ZTE is back in trouble with US authorities, which isn't exactly a new position for the company. Years after paying a staggering $1.19 billion fine for illegally selling products to Iran, ZTE now faces allegations that it bribed officials to secure contracts in Brazil. The potential penalty? Another billion dollars, give or take.

You might be tempted to shrug this off as business as usual in developing markets, but that misses the larger point. The US is using its economic leverage, specifically ZTE's dependence on American software and components, to enforce anti-corruption standards on foreign companies. This isn't without precedent. European companies like Siemens have faced similar reckonings.

The motivation here boils down to fair competition. American companies are prohibited from bribing foreign officials, thanks to the Foreign Corrupt Practices Act. When Chinese or European competitors win contracts through bribery, Washington sees that as fundamentally unfair. US manufacturers who lose bids often deploy investigative teams to uncover irregularities, and once they report findings, the regulatory machinery kicks into gear.

Beijing will likely frame this as American bullying, but the reality is more nuanced. ZTE competes for substantial contracts that involve ongoing annual upgrades and maintenance. The US isn't going to stop watching these competitions closely. ZTE will probably survive this latest episode. There are non-US manufacturing alternatives available, though they might cost more or deliver lower quality. But the message couldn't be clearer: the US intends to use whatever leverage it has to police competitive practices, regardless of where the competition takes place.

These two stories, Hong Kong's IPO surge and ZTE's regulatory troubles, might seem disconnected at first glance. But they're really two sides of the same coin, illustrating how compliance requirements and capital market access are becoming increasingly intertwined with geopolitical considerations. Chinese companies are finding that while Hong Kong offers a vital funding alternative, operating globally means navigating an increasingly complex web of regulatory expectations and enforcement actions.