The United States (US) Senate has just passed a bill that could potentially delist Chinese companies from the stock exchange.
Barring Chinese Companies
A resounding round of approval came from the Senate last Wednesday. They had just passed a law that would potentially take out Chinese companies from listing their shares in the stock exchange. It could also end Chinese companies earning money from American investors.
The bill is called the “Holding Foreign Companies Accountable Act”. It was submitted by Louisiana Republican Senator John Kennedy to sweeping approval. There were no objections made towards the bill.
The bill was also co-sponsored by Maryland Democrat Senator Chris Van Hollen and North Dakota Republican Senator Kevin Cramer.
The bill will require all Chinese companies to prove that they are neither controlled nor owned by a foreign government. Apart from that, these companies also need to submit an audit.
This audit will then be reviewed by the Public Company Accounting Oversight Board. This is the nonprofit group that keeps an eye on and audits all companies in the US that wish to raise money in public markets.
Kennedy addressed the Senate floor. He was adamant that he didn’t want another Cold War to take place. Instead, all he wants is that China “play by the rules”.
This sentiment was already explained by Harris Bicken’s Steve Dickinson. Dickinson wrote in the China Law Blog the exact same thing that the new law advocates.
According to him, Chinese companies have not been following U.S. Securities law. This is mainly because law in China does not allow for their auditors’ work to be transferred out of the country.
He compares other countries to China, saying that China is the only country that is exempt from “meaningful financial oversight.”
The White House Concurs
The US Government has already voiced these concerns. The Trump administration is supportive of more financial oversight on Chinese companies.
White House economic adviser Larry Kudlow spoke to the Fox Business Network last Tuesday. Kudlow said that they need to protect investors as well as national security.
Kudlow also indicated that there have been many Chinese companies wrought with scandals. This is also because of lack of financial transparency. The irony is that the Chinese government bans this kind of transparency.
The new bill may very well be the solution to these problems. However, before it gets passed, it needs to go through the House of Representatives currently controlled by Democrats. Afterwards, it will go to the president’s desk.
The director of economic policy at Veda partners gave a progress report about the new bill. She said that there has been no decision to hold a vote as of yet. She also notes that both sides are eager to support the bill.
Last 2019, the U.S.-China Economic and Security Review Commission made a list of Chinese companies in the US. At the time, there were 165 Chinese companies listed.
These companies include tech giant Alibaba, JD.com, and Baidu Inc. If the bill were to push through, there would be negative repercussions to these companies.