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US approves delisting bill targeting Chinese companies

Written by Wency Chen Published on 

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The tensions between the two countries and the Luckin Coffee accounting scandal pushed the US regulator to move forward and impose new rules.

The House of Representatives on Wednesday unanimously passed a bill that threatens to delist Chinese companies, including e-commerce giants Alibaba (NYSE: BABA), JD.com (NASDAQ: JD), Pinduoduo (NASDAQ: PDD), and EV maker Nio (NYSE: NIO), from US exchanges if they fail to comply with the inspections from US regulators within three years.

With approval from the House, the Holding Foreign Companies Accountable bill now awaits President Trump’s signature to take effect. It targets the issue that China doesn’t allow inspectors from the US watchdog Public Company Accounting Oversight Board to review Chinese companies that trade on American markets.

Although the problem has been discussed for years, Chinese firms kept looking to the US to attract more international capital. The tensions between the two economies and the Luckin Coffee accounting scandal pushed the US regulator to move forward and impose new rules.

Separately, the Securities and Exchange Commission eyes a recommendation that could allow Chinese auditors to adhere to the inspection requirement without violating China’s laws. The SEC could issue the proposal this month.

Currently, more than 250 Chinese companies are listed on US bourses with the combined market capitalization surpassing USD 2 trillion, the Wall Street Journal wrote, citing S&P Global Market Intelligence. Chinese companies have raised about USD 12 billion in IPOs this year.

In the midst of the US-China tussle, several listed companies retreated from the US capital market, opting to go private or shift to Hong Kong, a market closer to home. Among them are Alibaba, ​JD.com​, Netease, Sougou, and Sina.

“The US policy demonstrates discrimination against Chinese companies and it’s political repression,” said Foreign Ministry spokesperson Hua Chunying at a recent press conference. “We hope that the US can provide a fair and just environment for foreign companies to invest and operate in the US, instead of trying to erect barriers and obstacles,” she said.

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