Tag Archives: China Life

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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Financial Expansion

The steady movement overseas of Chinese financial institutions continues with Ping An Insurance taking a 4.2% stake in Fortis, the Belgo-Dutch group, for $2.7 billion. China Life, Ping An’s larger rival, said earlier this week it planned to buy a stake in a big European or North American insurance company.

In part this is reflection of Beijing’s switch from conservative management of its huge foreign exchange reserves to more return-oriented portfolio investment, but is also marks a widening of the range of companies Beijing is pushing out into the world. Last year a quarter of China’s $21 billion of outward investment went into natural resources. That focus is diffusing.

So far China’s banks have led the way for its financial services firms. ICBC took a 20% stake in Standard Bank in South Africa for $5.5 billion as well as a 90% stake in Indonesia’s Halim Bank. Bank of China is reportedly interested in buying Standard Chartered Bank. CITIC has taken a cross holding in the U.S.’s cash-strapped Bear Stearns investment bank and China Development Bank has taken a stake in the U.K’s Barclays and is tying up with the United Bank for Africa in Nigeria.

China is stacking up the reserves fast enough for this foreign buying spree to continue — just as European and American financial firms are stepping up their complaints that they aren’t getting fair access to the Chinese market.

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