US bill to delist Chinese companies politicizes market regulations: CSRC

By Yang Kunyi Published: 2020/5/25 4:06:51

A trader takes a picture of screens displaying trading information in the New York Stock Exchange in New York, US on March 18, 2020. Photo: VCG

A bill that aims to delist Chinese companies from the US stock exchange is "directly targeting China," and is grounded in political rather than professional motives, the China Securities Regulatory Commission (CSRC) said at a press conference on Sunday. 

"The bill is jeopardizing the interest of both sides. It is deterring foreign companies from being listed in the US and is weakening international investors' confidence in the US' capital market," the CSRC said. 

The bill, titled The Holding Foreign Companies Act, would force Chinese companies to adhere to US securities law and could potentially delist Chinese companies if passed, while some of its content explicitly targets China. 

The bill would require foreign-owned companies to establish they are not controlled by a foreign government, and would need to submit to an audit review by the Public Company Accounting Oversight Board (PCAOB). If the US regulators cannot inspect a company's audits for three consecutive years, it will be banned from trading on the US market. 

Chinese companies make up most of the foreign entities listed in the US, and some of the biggest ones, including China National Petroleum Corporation and China Mobile, are state-owned. 

The bill passed the Senate on Wednesday and was introduced to the House of Representatives by Democratic Representative Brad Sherman on the same day. 

According to Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, chances are "very high" the bill will pass the House as the US continues to increase efforts to alienate Chinese companies from its capital market. 

Earlier this month, plans to shift part of US retirement assets to invest in an index fund, which includes Chinese companies were halted by the Federal Retirement Thrift Investment Board. 

"The Trump Administration is trying to squeeze Chinese companies out of the US market," Dong said, "It is sabotaging its self-claimed free market, and is irresponsible to the investors."

As of February 2019, 156 Chinese companies have been listed in the US, according to the US-China Economic and Security Review Commission. Some of the biggest Chinese companies, including e-commerce giants Alibaba Group and, are listed on US stock exchanges. 

"Stock exchanges in China, including the Hong Kong Stock Exchange and the ChinNext board in Shenzhen Stock Exchange have been going through reforms over the years to be more open," Dong said. "Even if the Chinese companies have to be delisted in the end, the domestic exchanges will be welcoming."

CSRC said it is looking forward to a positive response from the US regulator, and hopes negotiations will be equal and friendly.

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