Trump’s push for listing Chinese firms to follow US accounting rules another assault from Washington: analysts

By GT staff reporters Source:Global Times Published: 2020/5/15 17:43:40

A trader works at the New York Stock Exchange in New York, the United States, on July 13, 2018. US stocks closed higher on Friday. The Dow Jones Industrial Average rose 94.52 points, or 0.38 percent, to 25,019.41. The S&P 500 rose 3.02 points, or 0.11 percent, to 2,801.31. The Nasdaq Composite Index rose 2.06 points, or 0.03 percent, to 7,825.98. (File photo: Xinhua)

US President Donald Trump is reportedly considering requiring Chinese firms to follow US accounting rules if they want to list on US stock exchange - another assault from Washington against Beijing - which could block more Chinese firms from US market financing, industry insiders said.

But that's not a big issue for Chinese firms, who are now more willing to list on Chinese mainland bourses, where the listing threshold has been reduced significantly amid capital market reform, or the Hong Kong stock market, where investors better understand their values, observers noted. 

Trump said in an interview with the Fox Business Network on Thursday that he was looking "very strongly" at imposing US accounting rules, known as Generally Accepted Accounting Principles (GAAP), on Chinese companies. 

Under US Securities and Exchange Commission (SEC) rules, foreign companies listed on the US exchange are required to follow a set of international accounting rules, while US companies must follow GAAP. A number of Chinese companies listed on the NYSE or Nasdaq follow GAAP, including Alibaba, according to a Wall Street Journal report. State-owned enterprises such as PetroChina Company tend to follow international rules.

In recent years, international accounting rules have inched closer to GAAP, but US rules are stricter in how revenues and profits are calculated, industry insiders said. 

The move comes amid Luckin Coffee's exposed fraud scandal and Trump's malicious China blame game to cover up his mishandling of the coronavirus outbreak. Trump also said during his interview with Fox that the US "could cut off the whole relationship" with China.

"It's an obvious threat that points a gun at Chinese companies. Trump wants to shut China's access to the US capital market. But chances the rule will be revised are very slim. If the SEC revises how it treats Chinese firms, rules for other foreign companies also need to be modified accordingly," Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Friday. 

An industry insider who spoke on condition of anonymity told the Global Times on Thursday that capable Chinese firms now have a strong preference to list on Chinese bourses compared to other overseas options. 

"In the past, they were forced to raise funds in the US, where listing is much easier. But with capital market reform and the birth of the sci-tech board, exchanges in the Chinese mainland are more ideal," the insider said. He added that listing in Hong Kong has also gained favor among Chinese entrepreneurs, as the market knows Chinese firms better and trading could reflect the company's true values.

As such, the impact the potential rule change would have is limited, according to Chinese observers.

A number of Chinese firms listed in the US including NetEase, Ctrip, and Baidu have reportedly been mulling plans for second listings in Hong Kong.


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