US Senate passes bill to delist Chinese firms from American Stock Exchanges – Free PDF

• US lawmakers have in recent weeks unleashed a torrent of legislation aimed at punishing China for not being more forthcoming with information or proactive in restricting travel as the coronavirus began to spread from the city of Wuhan, where it was first detected.

WHAT IS THE BILL ABOUT?

• The Senate overwhelmingly approved legislation {20-May} that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchanges amid increasingly tense relations between the world’s two largest economies.
• The bill, introduced by Senator John Kennedy, a Republican from Louisiana, and Chris Van Hollen, a Democrat from Maryland, was approved by unanimous consent and would require companies to certify that they are not under the control of a foreign government.

RULE

• If a company can’t show that it is not under such control or the Public Company Accounting Oversight Board isn’t able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges.
• Kennedy told on Tuesday that the bill would apply to U.S. exchanges such as Nasdaq and the New York Stock Exchange.

WHY THIS BILL?

• U.S. lawmakers have raised red flags over the billions of dollars flowing into some of China’s largest corporations, much of it from pension funds and college endowments in search of fat investment returns.
• These technology giants aim to develop leading positions in everything from artificial intelligence to internet data collection.
• Shares in some of the biggest U.S.-listed Chinese firms, including Baidu and Alibaba, slid on 21-May in New York while the broader market gained.

BIPARTISAN SUPPORT TO THE BILL

• “Publicly listed companies should all be held to the same standards, and this bill makes common sense changes to level the playing field and give investors the transparency they need to make informed decisions,” Van Hollen said in a statement.
•  “I do not want to get into a new Cold War,” Kennedy said on the Senate floor, adding that he wants “China to play by the rules.”

HOUSE BILL

• Another companion bill introduced, according to which “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.”

CHINA WAS RAISING MONEY IN DOLLARS

• Since then China and the U.S. have been at odds on the issue even as companies including Alibaba and Baidu have raised billions of dollars selling shares in American markets.
• The long-simmering feud came to the forefront last year as Washington and Beijing clashed over broader trade and economic issues, and some in the White House have been urging Trump to take a harder line on the audit inspections.
• Last week, Trump said in an interview on Fox Business that he’s “looking at” Chinese companies that trade on NYSE and Nasdaq exchanges but do not follow U.S. accounting rules.
• This important legislation would protect American retail investors and pensioners from risky investments in fraudulent, opaque Chinese companies that are listed on U.S. exchanges and trade on over-thecounter markets
• “If Chinese companies want access to the U.S. capital markets, they must comply with American laws and regulations for financial transparency and accountability.”

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