Chinese shares are facing renewed risk of being delisted in the US after Treasury Secretary Scott Bessent said such a move was possible, refueling a longstanding dispute.
Asked if he would be open to removing Chinese shares from US exchanges, Bessent said during a recent media interview, “I think everything’s on the table.” He added that it will ultimately be President Donald Trump’s decision.
His comments come as a tariff war between the world’s two largest economies intensifies. Earlier this month, China struck back at the 145% tariffs imposed by the US with a 125% levy on US goods.
It is unclear how seriously the idea is being considered, but any potential delisting of Chinese shares traded in the US would further escalate the decoupling between the two.
Here are five things to know:
What has Trump said about the issue?
Trump has pushed the US treasury and other government departments to review or expand restrictions on Chinese investments in the US, according to his “America First Investment Policy” issued in February.
The memo directs US officials to “determine if adequate financial auditing standards are upheld for companies covered by the Holding Foreign Companies Accountable Act (HFCAA).”
The HFCAA was enacted in 2020, mandating that foreign companies listed there comply with American auditing standards after Beijing blocked Chinese companies from sharing their financial statements with US inspectors.
Companies that fail to meet the requirement could be booted off US exchanges.
US officials could force Chinese companies to delist in the US under a presidential order, citing national security risks, said a source who spoke on the condition of anonymity.
Which US-listed Chinese shares are most at risk of being delisted?
About 280 companies from mainland China are listed in the US, with a combined market capitalization of around USD 880 billion, said HSBC equity strategists led by Herald van der Linde in a report released on April 14.
Of them, 20 companies, each with a market cap of more than USD 1 billion, are solely traded in the US, they said. The companies include PDD, the e-commerce group that owns Temu, Full Truck, a trucking startup, and Vipshop, an e-commerce company. “We believe these companies are most exposed to the delisting risk,” they said.
Three quarters of Chinese companies listed in the US by market cap are traded in Hong Kong, they said in the report. More than half of which are eligible for purchase by mainland Chinese investors through the Stock Connect program that links the Shanghai and Shenzhen exchanges to Hong Kong’s bourse, they said.
What does history say?
Chinese state-run companies China Telecom, China Unicom, and China Mobile were suspended and delisted from the New York Stock Exchange during the administration of former US President Joe Biden in 2021 due to their suspected links to the Chinese military, said Brian Freitas, analyst at Periscope Analytics, who publishes on research platform Smartkarma.
“So there is a precedent for a potential delisting,” he said. The number of Chinese companies delisted back then was “a very small percentage of the total shares outstanding, so the impact was small,” he added.
After the passage of the 2020 law stipulating US-listed foreign companies open their books to local regulators, many mainland Chinese companies delisted from the US and moved to Hong Kong, according to HSBC.
Notable Chinese companies that have left US exchanges include ride-hailing group Didi Global and the state-owned oil and gas company PetroChina.
In 2022, the US Securities and Exchange Commission had added the e-commerce group Alibaba Group and Baidu, a search engine popular in China, to its watchlist of companies at risk of being delisted for failing to comply with American auditing standards.
What would potential delistings mean for investors?
“The Chinese ADR (American depositary receipt) headaches are back,” said Winston Ma, an adjunct law professor at New York University, referring to foreign companies listed in the US. “Overseas investors, especially institutional investors, are far more sensitive to the delisting topic this time than three years ago.”
University endowments and state pension funds have invested in Chinese public equities. But with increasing state pressure, some pension funds have began reducing their exposure to China.
In 2022, US and Chinese authorities made a preliminary agreement allowing the former to review the books of Chinese companies listed in the US, averting them from being delisted. This time, “anything could happen under the current Trump administration in the context of the ‘America First Investment Policy’ memo signed by Trump back in February,” Ma said.
In an extreme scenario, where Americans are restricted from investing in Chinese securities, US investors would liquidate around USD 800 billion of Chinese stocks across those in the US, Hong Kong, and mainland China, said Goldman Sachs equity strategists led by Kinger Lau in a note shared on April 14.
There is the possibility of the Chinese selling their US assets, with the risk that a total of USD 1.7 trillion worth of US treasuries and equity holdings could be sold, Goldman Sachs strategists said.
Who stands to benefit from potential delistings?
“If the rumors of Chinese stocks being delisted from US exchanges gather steam, we could see a wave of secondary listings in Hong Kong,” said Freitas of Periscope Analytics.
He said he expects a drop in valuations of new listings in Hong Kong, particularly those of tech shares, and that their liquidity will be lower than in the US.
While acknowledging that the average daily turnover in Hong Kong is lower than in the US for companies listed in both places, HSBC strategists said using the Stock Connect scheme could be a solution.
“Inclusion in the Stock Connect can offset this difference in trading volume as is already evident in the case of Alibaba and, more recently, KE Holdings,” a real estate company, they said.
The Hong Kong Stock Exchange’s daily turnover could increase by USD 1 billion if 20 large Chinese companies that are only listed in the US were to be traded in the territory, HSBC strategists said.
Hong Kong Stock Exchange’s average daily turnover stood at USD 280 billion in March, according to its website.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.