Tag Archives: Chalco

NYSE Delistings Will Nudge Forward China-US Decoupling

DID THEY JUMP, or were they pushed? Whichever, the coordinated announcements by five large Chinese state-owned companies that they are to delist voluntarily from the New York Stock Exchange pre-empt US authorities doing it mandatorily.

The five companies are the oil giants PetroChina and China Petroleum and Chemical (Sinopec), Sinopec’s refining subsidiary, Sinopec Shanghai Petrochemical, Aluminum Corp. of China (Chalco) and China Life Insurance, one of the largest state-owned insurers. All have primary listings in Hong Kong. 

All are also in sectors that Beijing would consider strategic and thus is sensitive to information about them being made available to foreign regulators.

The US Securities and Exchange Commission (SEC) and the China Securities Regulatory Commission have been battling for two decades over incompatible auditing regulations. 

The SEC wants US-listed Chinese mainland-based companies to provide the top US audit watchdog, the Public Company Accounting Oversight Board, with the same access to their financial records that is required of all companies to protect investors from accounting frauds and other financial wrongdoing. 

China refuses to let its companies open their books to foreign regulators for national security reasons.

Last year, there were indications of a compromise being struck, but discussions seemingly have stalled. However, it is possible that voluntary delistings that take the most sensitive Chinese companies out of the equation could be paving the way for an agreement. 

The fundamental problem remains that US rules require listed firms to allow access to information that China bars them from disclosing. 

Under the Holding Foreign Companies Accountable Act passed in 2020, the US Congress has imposed a deadline of 2024 for the NYSE to expel companies that do not comply with US audit requirements. 

Upwards of 200 Chinese firms, Alibaba among them, with an aggregate market capitalisation of more than $1 trillion, are potentially at risk of delisting. The departure of each one would mark another step in the slow walk of economic decoupling between the two countries.

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