Flip-flops and irrational moves
Actions against Chinese firms and apps undermine America’s standing in the financial world
The New York Stock Exchange’s two reversals within a week on a move to delist three Chinese telecom companies, and Trump’s executive order banning transactions with eight Chinese applications, highlight the randomness and uncertainty of the United States’ rules and regulations, harming its image as a global financial hub, officials and experts said.
The NYSE said recently that it will delist the Chinese telecom companies on Jan 11, in another flip-flop a day after US Treasury Secretary Steven Mnuchin reportedly told the bourse chief that he disagreed with its earlier decision to reverse the delisting.
All the three Chinese telecom giants were delisted from NYSE on Jan 11, with trading in the securities suspended at 4 am Eastern Standard Time. However, the US move showed limited consequences as shares of the companies on that day gained up to 6 percent in Hong Kong, in what appears to be a defiant move by investors in the three firms. The upward trend continued on Jan 12.
The latest move highlights confusion over how to implement the executive order issued by the US president in November barring Americans from investing in more than 30 companies that are alleged to be associated with the Chinese military, experts said.
Chinese foreign ministry spokeswoman Hua Chunying on Jan 7 quoted comments from Japan’s Nikkei financial newspaper that the NYSE’s frequent changes on the delisting decision were causing chaos in the capital market.
By doing so, the US government is ultimately harming its own national interest and image. The status and credibility of the US as a global capital market will inevitably be eroded and damaged, Hua said.
“China will take necessary measures to safeguard the legitimate rights and interests of Chinese companies,” she added.
The NYSE originally announced on Dec 31 that it would delist China Mobile Ltd, China Telecom Corp Ltd and China Unicom (Hong Kong) Ltd. On Jan 4, after consulting with relevant regulators, it decided instead to keep them listed.
However, it changed course again, announcing on Jan 6 that it will proceed with the delisting, marking a return to the original plan. The NYSE said in a statement that its latest decision, to move forward with the delisting, was based on new specific guidance received on Jan 5, from the US Department of Treasury’s Office of Foreign Assets Control.
The on-again-off-again gyrations made for a volatile week for the three stocks. Two of the companies, China Mobile and China Unicom, have been listed on the NYSE since 1997 and 2000 respectively.
Jim Collins, CEO of Excelsior Capital Partners in New York, said: “It’s like following a tennis match. I can’t keep up with the back and forth. Access to capital has been so globalized, though, that I think it is all about politics and would have almost zero impact on the Chinese telcos’ ability to raise money from Western investors.”
At a regular press briefing on Jan 12, Zhao Lijian, a spokesman for China’s foreign ministry, said in Beijing: “I stress once again that the position of the United States as an international financial hub hinges on global companies and investors trusting the inclusiveness and certainty of its rules and mechanisms. Lately some political forces in the United States have been wantonly suppressing foreign companies listed in the country, exposing an arbitrary and capricious uncertainty in its rules and mechanisms.”
China Merchants Securities, a Chinese securities company, said in a research note that the US delisting will not have substantial impacts on the three Chinese telecom operators. “They have sufficient capital and diversified financing channels. Their businesses are also mainly concentrated in China, with large user bases and stable operations.”
Liu Chunsheng, an associate professor of international economics and trade at the Central University of Finance and Economics, said the delisting U-turns have undermined the US’ credibility as a global financial hub, by sparking concerns whether Washington will impose sanctions on firms from other economies in an arbitrary and unpredicted manner.
The U-turns could backfire in that they have provided an opportunity to elevate the financial heft of China, which has, by contrast, been consistent in gradually opening up its financial sector toward a more market-oriented, law-based position, Liu said.
That said, Liu stressed that there remains a long way to go for China to become a major global financial center.
“It will be beneficial for both sides if the Chinese and the US governments resolve their disputes in a number of fields, including regarding US-listed Chinese firms, via a comprehensive and open dialogue,” he added.
US President Donald Trump previously also signed an executive order banning transactions with eight Chinese apps, including popular Chinese payment apps Alipay and WeChat Pay, over privacy concerns. The other apps are CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate and WPS Office. The executive order goes into effect in 45 days.
The president said in the order that the apps can access private information from their users. That information could be used to “track the locations of Federal employees and contractors, and build dossiers of personal information”, he said.
The order instructs Commerce Secretary Wilbur Ross to evaluate other apps that could pose a “national security threat”.
Hua, the Chinese foreign ministry spokesperson, said on Jan 6 that the ban is another example of the US abusing national power to unjustifiably crack down on foreign companies. The order will have some impact on related Chinese companies, but more importantly, it will harm the interests of US consumers and the interests of the US.
She urged the US to respect the principles of the market economy and fair competition and abide by international economic and trade rules to provide an open, fair, just and nondiscriminatory business environment for foreign companies, including Chinese ones, to invest and operate in the country. She added that China would take necessary measures to safeguard the legitimate rights of Chinese companies.
The foreign ministry spokesperson added: “What the United States has been doing is a vivid textbook on double-facing on its much-touted free market economy and fair competition.
“The US side claims that the ban on Alipay and WeChat Pay is to protect American citizens’ privacy and data security. However, the fact is, the United States is unrivalled when it comes to telecom theft. Its strong surveillance and highly resourceful means has rendered privacy or data security nothing but fiction for the American people and people in other countries.”