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Chinese conceptual stocks listed in the United States will face an extremely severe test.
On the evening of December 2, East Coast time of the United States, the United States House of Representatives formally approved the “Holding Foreign Companies Accountable Act”: this very popular bill is considered as the target of Chinese concept stocks listed in the States United. And launched.
And behind these conceptual Chinese titles, there are a large number of Chinese Internet technology companies.
It is worth mentioning that as early as May of this year, the US Senate approved the bill, which means that the bill will be delivered to the White House and will take effect after the US president takes it. signed.
The rain is coming and the wind is full of buildings, and a large number of Chinese concept stocks have fallen after hearing the wind.
“Foreign Company Accountability Act” for Chinese companies
From a certain point of view, the “Foreign Corporate Liability Law” is aimed at Chinese companies.
Leifeng.com learned that at the end of 2019, Republican Senator John Kennedy (John Kennedy) of Louisiana, USA, proposed the “Foreign Company Accountability Act”; later, after the Ruixing fraud incident, John Kennedy and Democratic Senator Van Hollen jointly proposed the bill.
In May 2020, the bill was approved by the United States Senate. At the time, when John F. Kennedy spoke in the Senate, he said, “I don’t want to fall into a new cold war … I think what we all want is for China to stick to the rules.”
Van Hollen also did not hide the fact that the bill came from “intense US-China tensions have aroused political concern”.
In this regard, White House Economic Adviser Larry Kudlow also stated in an interview:
We must protect investors and we must also protect national security … As these companies have failed to maintain transparency in their dealings, many companies have already had scandals and caused many losses to investors.
Leifeng.com has learned that there is a fundamental clause in the “Foreign Company Accountability Act”: if a company cannot prove that it is not controlled by a foreign government, or if the American Public Company Accounting Oversight Board (PCAOB) cannot verify it for 3 consecutive years, then the company’s securities will be banned from trading on US exchanges.
In other words, this bill effectively requires that Chinese companies listed in the US be subject to the three consecutive years of revision of the PCAOB.
But in fact, according to the law enforcement memorandum of cooperation signed between the China Securities Regulatory Commission and the US Ministry of Finance and the US PCAOB on May 7, 2013, China and the US have a cross-border cooperation of law enforcement agencies for accounting and control. Chinese accounting firms have carried out pilot inspections and since 2019 have repeatedly proposed specific plans to the PCAOB for joint audits of accounting firms.
Indeed, if PCAOB needs to obtain accounting documents from Chinese companies due to investigation of the case, it can request the China Securities Regulatory Commission and the Ministry of Finance to obtain the corresponding accounting documents without violating the “Privacy Law” and other Chinese regulations. . .
Therefore, the practice of requiring US-listed Chinese companies to be controlled by the PCAOB for three consecutive years is actually a bit excessive.
It is worth mentioning that in August 2020, the US Treasury Department released the “Report on the Protection of US Investors from Major Risks of Chinese Companies” on its official website, suggesting that Chinese companies should raise the threshold for the listing, strengthen information disclosure requirements and strengthen Investment Risk Notice and require U.S. listed companies to meet relevant PCAOB inspection requirements by January 1, 2022 at the latest.
There are even reports that the US Securities and Exchange Commission (SEC) has suggested to Trump that all Chinese companies that have been listed in the US but do not meet US statutory audit requirements must be removed before the January 2022.
The share prices of many Chinese technology companies have fallen, and the Chinese have also expressed their views
After the aforementioned bill was passed, Chinese concept joint-stock companies followed the news.
It is understood that when the US stock market closed on December 2, the popular Chinese conceptual actions were mixed. For example, Baidu was up 2.45%, Jingdong was down 1.15%, Pinduoduo was up 5.51%, Xiaopeng Motor was up 6.76%, and Weilai was up 5.73%.
However, influenced by the news of the aforementioned bill, some popular Chinese concept stocks fell after the market. Among them, Baidu fell 0.49%, JD.com and Pinduoduo both fell more than 1%; the three new auto manufacturing forces also refused, Weilai fell 3.57%, Xiaopeng Motors fell 2.95%, and Ideal Motors fell 1.64%.
Of course, the relevant departments of our country have responded to this bill many times.
As early as May 2020, when the bill was approved by the US Senate, the China Securities Regulatory Commission said that, judging by the bill and the speeches of relevant people in the US Congress, some of the provisions of the bill are directly aimed at China, rather than based on professional supervision of securities. With this in mind, we strongly oppose this practice of politicizing securities supervision.
The Securities Regulatory Commission believes the bill will harm the interests of both parties. Not only will it prevent foreign companies from going public in the US, it will also undermine the confidence of global investors in the US capital market and its international status.
Finally, the CSRC also invited:
It is hoped that stakeholders in the United States will maintain professionalism, meet China halfway, and handle regulatory cooperation issues in accordance with the principles of commercialization and the rule of law. Promote cooperation between China and the United States for the supervision of audits with practical actions to promote timely consensus between the two parties and jointly protect the legitimate rights and interests of investors.
In addition to the China Securities Regulatory Commission, the Ministry of Foreign Affairs of China also responded to the bill on 2 December. In response, the United States has adopted a discriminatory policy towards Chinese companies, which is a political repression of Chinese companies; stakeholders are openly strengthening cross-border policies. Regulatory cooperation, strengthening dialogue and cooperation on issues such as protecting the legitimate rights and interests of investors is the right way to solve the problem.
However, judging by the current situation, after the US Senate and House of Representatives voted in favor, the Foreign Companies Accountability Act is only one step away from becoming a US law.
To put it simply, it was signed by the US government Trump, so what’s Trump’s attitude?
As early as May of this year, Trump said in an interview that the White House was observing how Chinese companies listed on US stock exchanges are not complying with US accounting standards, but he also admitted that if Chinese companies are required to comply with the US accounting principles, might suggest Chinese companies have turned to other international financial centers such as London and Hong Kong to go public.
Considering Trump’s attitude towards China since he took office, there aren’t many obstacles to signing this bill.
It is worth mentioning that, according to the British Financial Times, US investors’ assessments of the bill are split, but the general feeling is that even if it becomes law, it will take several quarters for Chinese companies to face the threat of delisting. It may take several years to demonstrate and not all societies are threatened to the same extent.
summary
For many years, the US stock market has always been a popular choice for Chinese tech companies when they go public.
However, judging by the situation over the past two years, more and more Chinese tech companies tend to be listed in Hong Kong, such as Xiaomi and Meituan; and companies like JD, Alibaba and NetEase that are already listed in the United States also choose to go public in Hong Kong at the same time. By going public, of course, there are also some Chinese tech companies that choose to go public on the US stock market, like the three new automakers.
But on the whole, in 2020, when Sino-US relations are under effect, the US capital market is not too friendly towards Chinese tech companies, and Chinese conceptual actions could face some serious challenges in the future.
It is worth mentioning that Song Yang, chief executive officer of China Renaissance Capital, previously said that a maximum of 50-60 Chinese concept stocks are expected to be listed in Hong Kong over the next 3-5 years, perhaps this prediction is not unfounded.
Reference link for this article: (Lei Feng Net Lei Feng Net Lei Feng Net(Public account: Leifeng.com)）
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