HONG KONG/BEIJING (Reuters) – Chinese search engine giant Baidu Inc (BIDU.O) is considering delisting from the U.S. Nasdaq and moving to an exchange closer to home to boost its valuation amid rising tension between the United States and China over investments, three sources said.

Baidu, one of China’s earliest U.S. listings, is reaching out to some trusted advisers to see how it could best be done if it were to proceed, including looking at issues around funding and any regulatory reaction, the sources told Reuters.

The discussions are at an early stage and are subject to change, said the sources, who spoke on condition of anonymity because the matter is not public.

Baidu declined to comment.

The company pointed to comments by co-founder and Chief Executive Robin Li who told the state-controlled China Daily on Thursday that Baidu was paying close attention to the tighter U.S. scrutiny of Chinese companies listed in the country.

“For a good company, there are many choices of destinations for listing, not limited to the U.S.,” he told the newspaper.

The sources said Baidu believed it was undervalued on the Nasdaq exchange in New York.

Baidu’s shares have fallen more than 60% since their peak in May 2018 while the Nasdaq Golden Dragon China Index .HXC, which tracks Chinese firms listed on the U.S. exchange, has lost less than 10% over the same period.

Baidu’s market capitalization of $29.59 billion as of Wednesday’s close is only 5% of the market value of Alibaba, which has shares listed in Hong Kong (9988.HK) and American Depository Shares listed in New York (BABA.N).

Baidu, Ctrip (TCOM.O) and NetEase Inc (NTES.O) have all held preliminary talks with Hong Kong Exchanges and Clearing (0388.HK) about a possible secondary listing to follow Alibaba in establishing an investor base closer to China, Reuters reported in January.

The latest move by Baidu also comes as U.S.-listed Chinese companies face increased pressure amid heightened tensions between the world’s two biggest economies.

The U.S. senate passed a bill on Wednesday that could stop some Chinese companies listing on U.S. exchanges unless they follow standards for U.S. audits and regulations.

The move is seen as an escalation of a long-running dispute between Washington and Beijing about giving U.S. regulators access to Chinese audits.

Last week, a board overseeing the Thrift Saving Plan, a retirement fund for U.S. federal employees and members of the military, indefinitely delayed plans to invest in some Chinese companies following pressure from the White House.

At home, Baidu has been struggling with a slowing economy and rising competition from domestic players such as ByteDance, the owner of popular video-sharing app TikTok. Last year, ByteDance launched a search engine in China, entering a sector traditionally dominated by Baidu.

Beijing-based Baidu posted a 7% drop in first-quarter revenue this year. While its sales were better than analysts had expected, it was the biggest year-on-year drop since the company went public in 2005.

Baidu generates the majority of its revenue from online marketing services, which include searches, news feeds and video apps.

Reporting by Julie Zhu in Hong Kong and Zhang Yan in Beijing; Editing by Jennifer Hughes and David Clarke

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