SHANGHAIHONG KONG, Reuters Chinese companies are staring at the prospects of a drought of new equity capital as tougher domestic IPO rules and challenges in listing overseas severely curb their fundraisings, putting at risk the floundering economy39;s recovery.

China39;s securities watchdog has sharply tightened scrutiny of IPOs this year, leading to companies scrapping domestic listing plans in droves, with some turning to offshore markets such as Hong Kong and New York.

However, sharper scrutiny of IPO hopefuls in the U.S. amid geopolitical tensions and a weaker Hong Kong market will stymie offshore listings for many, highlighted by Alibaba39;s move this week to ditch the Hong Kong IPO plan of its logistics unit.

During JanuaryMarch 2024, money raised via China IPOs plunged twothirds from a year ago to just 2.4 billion, the smallest quarterly fundraising since the fourth quarter of 2018, and down 82 from a year earlier, preliminary LSEG data showed.

The sudden freeze of an IPO market that was the world39;s biggest in 2023 and 2022 comes after the securities watchdog, under new chairman Wu Qing, vowed to step up scrutiny of listing candidates and crack down on any lapses.

The IPO tightening would make it increasingly difficult for small companies to raise capital and for private equity investment to exit, said Andrew Qian, CEO of Shanghaibased investment and advisory firm New Access Capital.

IPOs in China will become scarce resources, said Qian, who is now helping…