Senate passes bill that could block Chinese firms from USA securities exchanges

Cornelia Mascio
Mag 22, 2020

"Exchange-traded funds that allow investors to bet on Chinese companies were knocked lower midday Wednesday after the U.S. Senate approved sweeping new legislation that could ultimately bar many Chinese companies from listing shares on U.S. exchanges", a MarketWatch report said.

The China rhetoric in Washington is getting more hostile with the US President Trump shooting his first direct attack at China's Xi Jinping but there is also broader frustration in the financial markets over the lack of transparency from Chinese firms listed on US stock exchanges.

The legislation, which needs also to be passed by the House of Representatives, calls for a company to be barred from listing securities on USA exchanges if it has not complied with the U.S. accounting board's audits for three consecutive years.

The measure must still pass the House of Representatives and be signed by President Trump to become law.

House Speaker Nancy Pelosi (D-Calif.) said on Thursday that she will ask some House committees to review a bipartisan bill passed by the Senate which could delist some Chinese companies from the USA exchanges. "They've just been ignoring the rules", said Republican Senator John Kennedy of Louisiana, who introduced the bipartisan Bill together with Democratic Senator Chris Van Hollen of Maryland.

"We can't let foreign threats to Americans" retirement funds take root in our exchanges".

The Senate also passed a separate bill to sanction Chinese officials over human rights abuses against Muslim minorities, which is now being discussed by the House with guidance from lawmakers and members of the relevant committees.

The legislation - S. 945 - is another example of the rising bipartisan pushback against China in Congress that had been building over trade and other issues. Sherman said in a statement that Nasdaq moved this week to delist China-based Luckin Coffee after executives at the company admitted fabricating $310 million in sales between April and December 2019.

It appears that the USA is finally fed up with China's refusal to permit the Public Company Accounting Oversight Board (PCAOB) to review audits of their companies, many of which list on United States security exchanges, including NASDAQ and NYSE.

"This would definitely drive more Chinese companies to list in the greater China area", said Tianjun Wu, deputy economist at the Economist Intelligence Unit. He merely wants Chinese public companies trading in the be held to the same standards as their American counterparts.

"We don't want to be unfair to Chinese companies".

Shortly thereafter, White House Trade Adviser Peter Navarro said that reports that the United States plans on delisting Chinese companies from USA stock exchanges were highly inaccurate. The US has quite often resorted to trade and economic means to suppress China, he said.

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