Two state-owned airlines to delist American depositary shares from NYSE; obstacles still exist despite China-US audit deal
Published: Jan 13, 2023 11:49 PM
People walk by the New York Stock Exchange (NYSE) on November 11, 2022 in New York City. Photo: VCG

People walk by the New York Stock Exchange (NYSE) on November 11, 2022 in New York City. Photo: VCG

Two Chinese state-owned airlines on Friday separately announced plans to delist their American depositary shares (ADS) from the New York Stock Exchange (NYSE), the second such de-listing following a batch of Chinese companies in August last year.

Chinese experts said it shows there are still some obstacles even after China and the US reached some agreements on auditing supervision, but they said the loss would be borne by US investors.

According to a statement from China Eastern Airlines Corp, the company notified the NYSE that it will apply for a voluntary delisting of its ADS. The company said it intends to file a form with the US Securities and Exchange Commission (SEC) around January 23 and complete the delisting within 10 days thereafter.

The company gave several reasons for the decision in the statement, including the fact that it is facing a "considerable administrative burden" in meeting the required obligations to maintain the ADS listing in the US.

China Southern Airlines Co made similar statements on Friday.

Before the announcements, the China Securities Regulatory Commission (CSRC), the country's top securities regulator, said in December 2022 that China welcomes the latest progress made in China-US audit oversight cooperation.

On December 15, the US Public Company Accounting Oversight Board (PCAOB) confirmed that it was able to completely inspect and investigate the accounting firms headquartered in the Chinese mainland and Hong Kong in 2022, thus vacating its relevant determinations made in 2021, the Xinhua News Agency reported.

The delisting plans came after the agreement on the audit papers, which shows that the US may deliberately create obstacles on this issue, making it difficult for certain companies to implement the agreement reached between the two countries, Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing, told the Global Times on Friday.

Theoretically, after the agreement was reached, such a delisting should not be necessary, which shows that the US has still set up a lot of obstacles, Gao added.

In August last year, five Chinese state-owned giants announced plans to delist their ADS from the NYSE, drawing widespread attention amid escalating China-US tensions and constant US crackdowns on Chinese companies, including a push to potentially delist hundreds of Chinese firms in what many called a "financial decoupling."

Shortly after the announcements, the CSRC said that the companies' decisions were made based on their own commercial considerations. It said it would maintain communication with relevant overseas regulatory agencies to jointly protect the legitimate rights and interests of companies and investors.

The delisting plan by the two airlines will be a loss for American and global investors, coming as personnel exchanges have become closer after China eased its travel restrictions, Gao said.

It can't have been a sudden decision, as large airlines care about stable operation, said Zhou Mi, an expert with the Research Institute of America and Oceania under the Ministry of Commerce. It shows that Chinese companies still face some risks even after the agreement on auditing, Zhou said.

But he said it will be possible for the two firms to rearrange their financing, such as going public in the Chinese mainland and Hong Kong.