Pressure on Washington to avoid mass delisting of Chinese firms
The China Securities Regulatory Commission ( CSRC), China’s securities regulator, on Monday denied a media report suggesting China plans to sort US- listed Chinese companies based on the sensitivity of the data they hold in a bid to prevent US securities regulators from delisting hundreds of companies, Reuters reported.
Citing anonymous sources, the Financial Times reported on Sunday that Chinese companies listed in the US would be divided into three broad categories, that is, companies with non- sensitive data, those with sensitive data and others with “secretive” data so that part of the Chinese companies can avoid being delisted before the deadline.
While it is not clear how the rumor came about, its rapid spread among mainstream Western media outlets over the weekend highlighted great market concern over the ongoing China- US talks on auditing issues regarding Chinese firms and the general expectation of avoiding a mass delisting of Chinese stocks from the US market.
Since the US introduced the socalled Holding Foreign Companies Accountable Act, which aims to remove foreign companies from US exchanges if they fail to provide audits for inspection for three years in a row, there have been concerns over the fate of more than 200 Chinese companies listed in the US that are facing the risk of being delisted as early as 2024.
Against the backdrop of the strained economic and trade relations between China and the US, the new US bill is seen as an apparent attempt to target Chinese companies, a manifestation of the politicization of US stock market regulation.
Currently, the uncertainty over the fate of US- listed Chinese firms has captured the attention of global markets, which has already generated considerable impact on both Chinese companies and the US market.
Chinese and US officials have been engaged in negotiations over the audit dispute for some time. While the US Securities and Exchange Commission signaled that the results of the current negotiations and communications are not enough to prevent Chinese companies from being kicked out of the US market after the deadline, there are also positive signs that both sides are continuing consultations.
It needs to be made clear that ChinaUS audit cooperation talks are not something that only matters to China, but also to the US in terms of its market status and reputation. Both sides need to be cooperative to reach some arrangement that meets their legal and regulatory requirements or it will risk a blow to both Chinese companies and US market. Indeed, despite that the US has tightened its supervision of Chinese companies in recent years, China has always expressed support for overseas listings of Chinese companies, which is not only in line with market principles but is also of great significance to China’s opening- up and strengthened financial links with the rest of the world.
Amid the US’ moves, Chinese companies are also seeking alternatives. In the first half of this year, a number of Chinese companies already went to list in Europe, indicating that the US clampdown won’t dampen China’s enthusiasm for overseas listings. China is not asking a favor from the US when it comes to Chinese companies’ US listings. US- listed Chinese companies have offered US investors more opportunities to share the dividends of China’s long- term stable growth, while Chinese companies have more access to financing through the listings. This is obviously a win- win situation.
If US investors are denied access to Chinese companies because of the continuing politicization of market regulation in the US, that would be a regrettable loss for the US market.