THE UNITED STATES is formally proceeding with Trump-era plans to restrict Chinese companies access to US capital by delisting them from US stock exchanges.
Under the Holding Foreign Companies Accountable Ac that became law in mid-December, the penultimate month of the Trump presidency, the SEC had 90 days to outline a process by which it will request certain US-listed companies to submit documentation to establish that they are not owned or controlled by a foreign government — by which the Trump administration meant China. Foreign firms will also be delisted from US exchanges if they fail to comply with US accounting standards.
The US Securities and Exchange Commission (SEC) announced on March 24 that it had adopted measures to comply with the legally required 90-day deadline.
Delistings now look inevitable in a one day, someday, maybe never sort of way. The procedures that have to be followed for US government agency rule-making gives the SEC the latitude to spin-out the process, should it so choose, a choice that the prevailing winds from the White House would drive.
Many US-quoted Chinese companies could also spin-out any investigation into their ultimate ownership, plus they have to fail to meet the US audit requirement for three successive years. Nonetheless, they would have trouble complying with US audit requirements without violating Chinese laws. It is anyway improbable that they would prove willing to throw open their books to a foreign regulator.
It is possible that even after delisting, Chinese companies’ shares could trade in over-the-counter markets in the United States — unless the Biden administration or, more likely, its successor, decides to implement another Trump initiative to ban US investors from owning Chinese equities.
A bigger headache for Chinese tech firms at the moment is Beijing’s crackdown on the largest of their number, including Alibaba and Tencent, purportedly in the name of antitrust but more likely to rein in the growing power of a sector mostly privately, not state-owned but which authorities need to be aligned with state management of both the economy and cyberspace.