Congress Considers Delisting Chinese Companies

Issue 47

11.30.20 - A long-rumored move being contemplated in Washington that would have a far-reaching impact on China has been the consideration of locking out Chinese companies from western capital markets.  Lawmakers next week are likely to force Chinese companies with shares traded on U.S. exchanges to fully comply with audit-oversight rules—or leave U.S. markets altogether.

House leaders plan to consider a measure on Wednesday that would force Chinese firms such as Alibaba Group either to make the transition to getting an annual audit that is reviewed by U.S. regulators or remove the shares from trading in the U.S. The House plans to vote under rules that limit debate and require a two-thirds majority for passage, according to an online notice posted Friday.

The legislation, if it becomes law, would give Chinese companies and their auditors three years to comply with inspection requirements before they could be kicked off the New York Stock Exchange or Nasdaq Stock Market.

If the legislation goes into effect and Chinese companies refuse to comply with western accounting standards, this could cast doubt on the confidence of publicly listed Chinese businesses and force a further already unhealthy dependence on Chinese state-managed credit facilities due to less robust capital markets abroad.

Source: Wall Street Journal