THE NEW YORK STOCK EXCHANGE’S decision to suspend trading in the shares of China Mobile, China Telecom and China Unicom HK in preparation for delisting is mostly a symbolic move. The three state-owned companies’ businesses are domestic, and their shares are little traded in New York. Their primary stock exchange listing is in Hong Kong.
However, it is also symbolic of how the hardening of opinion against China in the United States is more widespread than just China hawks in the Trump administration.
All three telcos stand accused of having links with the People’s Liberation Army. Since November, US investors have been banned by US presidential executive order from buying and selling shares in Chinese companies designated by the US Department of Defence as being ‘Communist Chinese military company’. Both China Mobile and China Telecom were on such a list that the Pentagon published in June. China Unicom was added in an update published in October.
The NYSE says its move to delist the three telecoms companies is to be compliant with the executive order.
The list and executive order are part of the Trump administration’s attempts to slow both the PLA’s modernisation and the drive to develop indigenous technologies by denying Chinese firms access to US capital. Three of the world’s leading index providers, MSCI, FTSE Russell and S&P Dow Jones, have also dropped the proscribed Chinese companies from their indexes, depressing their stocks’ attractiveness to global investors.
More than 200 Chinese companies are listed on US stock markets with a total market capitalisation of $2.2 trillion. Prominent names like Alibaba and JD.com have pre-emptively taken secondary listings in Hong Kong.
The US House of Representatives has recently followed the US Senate in passing a bill requiring non-US listed companies (for which read Chinese firms) to comply with US stock exchanges’ auditing rules and disclose whether they are owned or controlled by a foreign government. Firms have three years to comply or face delisting.
The Trump administration has been ramping up its actions against China in its final weeks, intending to lock-in as much of its China policy as it can before it leaves office on January 20.
On December 18, it the Bureau of Industry and Security (BIS) in the U.S. Department of Commerce added more than 70 entities, including the high-profile chipmaker Semiconductor Manufacturing International Corp. (SMIC) of China, to the Entity List.
Listing effectively prevents a company doing business with any US firm as it requires the granting of a special export licence under the Export Administration Regulations (EAR) for any export, reexport or transfer to them of goods, software or technology. That licence is presumed to be denied for firms on the Entity List.
BIS followed that by announcing on December 21 that it was adding a new category, Military End User, to the EAR. Of the initial 103 entities so designated, 58 are Chinese.