COMMENTS / EXPERT ASSESSMENT
Does China really discourage its businesses from going public in the US?
Published: Dec 07, 2021 06:47 PM
Pedestrians wearing face masks walk past the New York Stock Exchange in New York, the US, on March 18. Photo: Xinhua

Pedestrians wearing face masks walk past the New York Stock Exchange in New York, the US, on March 18. Photo: Xinhua

After the China Securities Regulatory Commission (CSRC) responded to concerns about the prospects of Chinese companies going public in the US, US-listed Chinese stocks rebounded on Monday following last week's sell-offs. The Nasdaq Golden Dragon China Index closed up 3 percent. Alibaba shares rose 10.4 percent, recording the biggest one-day gain in four and a half years.

Affected by the US Securities and Exchange Commission (SEC)'s adoption of amendments to finalize rules relating to the Holding Foreign Companies Accountable Act (HFCAA) and the delisting of Chinese ride-hailing company Didi Chuxing, US-listed Chinese stocks suffered heavy losses last week amid Omicron induced volatility.

The decline in US-listed Chinese stocks was exacerbated by market rumors circulated among US media outlets. Bloomberg reported last week that China is planning to ban companies from going public on foreign stock markets through variable interest entities.

Refuting such misleading market rumors, the CSRC said in a statement published on its website on Sunday that responsible authorities in China have always been open to and fully respect Chinese companies' independent choices, should they select an overseas listing venue in compliance with relevant laws and regulations. 

Judging from the CSRC statement, the basic position of China's regulatory authorities is still one of fully respecting Chinese companies' decision in choosing where to go public. The regulator also noted that some domestic companies are actively communicating with domestic and foreign regulators to seek listings at US stock markets.

For a period of time, American media reports on China's market regulatory measures have obviously missed the point. The main goal of China's regulatory measures is to address financial regulatory loopholes and tamp down on monopolistic behavior. Relevant policies issued by the Chinese government are not aimed at suppression of specific industries or private enterprises, nor are they necessarily related to the overseas listing activities of Chinese enterprises.

In fact, it is the US that has been suppressing and even trying to force delisting of US-listed Chinese stocks. Over the past two years, the US has taken many measures to suppress Chinese stocks. The US is not holding an open attitude to Chinese companies to list at the US market, and has put forward unreasonable regulatory requirements.

According to rules finalized by the US SEC last week, it is allowed to delist foreign stocks if their auditors do not comply with requests for information from US regulators. The Public Company Accounting Oversight Board (PCAOB)'s request to inspect the audits of Chinese firms that list and trade in the US belongs to unreasonable long-arm jurisdiction.

Chinese regulatory agencies have repeatedly expressed their willingness to resolve regulatory difference through communication and cooperation, but some political forces in the US have sought to politicize capital market supervision, imposing rising pressure on Chinese companies listed in the US, and even coerce Chinese companies to delist. 

Admittedly, the US is still the world's largest capital market, but the suppression by the US government has thrown cold water on the aspirations of Chinese firms which will be considering listing there. 

The continued suppression by the US seriously interferes with the financing of Chinese companies, hit the stock prices of US-listed Chinese stocks, and cause their market value to shrink. For those companies that have business in the US market, the suppression of US regulators will also impact their businesses too. These triple shocks have caused Chinese stocks to face rising difficulties in the US.

If the US continues to implement this type of financial hegemony, arbitrarily suppressing US-listed Chinese stocks, it's an inevitable result that Chinese companies will start to get away from the US market, and there are many options for China companies. Till December 1, secondary listings in Chinese mainland and Hong Kong by US-listed Chinese firms totaled $15.25 billion, according to Refinitiv data, higher than the last two years, Reuters reported.

 This "decoupling" between China and the US in the financial sector will definitely have an impact on Chinese companies, but in the long run, it will also have an impact on the US. If the US continues to maintain its abusive policies, it will eventually harm its own financial market and reduce its attractiveness to global investors.

The author is deputy managing editor of the Securities Daily and an expert adviser for the China Securities Regulatory Commission. bizopinion@globaltimes.com.cn