Recently, Chinese stocks have plunged after the introduction of new regulations in the United States. In the past 20 years, Chinese companies listed in the U.S. have been “siphoning off” a lot of money, but now the U.S. regulation of Chinese stocks is getting stricter and stricter, and these companies are at risk of delisting, and the prospect of returning to China and Hong Kong is not favored because the stock markets in Hong Kong and China are controlled by the Chinese Communist Party.
Chinese companies going to the United States to “make money” under the strict regulation of the fear of delisting
According to Bloomberg, Chinese companies listed in the U.S. have received at least $144 billion in funding from global investors over the past 20 years. There are currently 272 Chinese stocks listed in the U.S.
In 2020, the Trump administration introduced the Foreign Company Accountability Act, which mandates that any foreign company listed in the U.S. that does not comply with U.S. accounting auditing standards for three consecutive years will be delisted. Within 90 days of the law taking effect, the U.S. Securities and Exchange Commission (SEC) must provide for information reporting by listed companies.
The law takes effect in December 2020, and on March 24 of this year the SEC announced that any listed company in the U.S. that does not comply with the relevant accounting review system will be removed from trading; the company must declare whether it has any Chinese Communist Party officials on its board of directors, among other things. A plunge in Chinese stocks ensued.
Statistics from the U.S. Securities and Exchange Commission’s Public Company Accounting Oversight Board (PCAOB) show that more than 95 percent of listed companies that obstruct U.S. regulators from conducting audits are mainland and Hong Kong companies.
As recently as 2020, when the Foreign Company Accountability Act was introduced, 30 Chinese companies still went public in the U.S., raising a total of $11.7 billion, exceeding the size set in 2014.
And a number of companies were also exposed to financial fraud last year, including RuiXing Coffee, Aiki, and Heilongjiang, of which RuiXing Coffee has declared bankruptcy.
The Chinese Communist Party holds the stock market in China and Hong Kong Chinese stocks are afraid of a difficult return trip
The Free Times reported on April 4 that the possible options for Chinese stocks under the increasingly strict regulation in the United States include: remaining in the U.S. stock market, but listing in Hong Kong for a second time, such as Alibaba and 13 other companies, gradually increasing the scale of trading in Hong Kong before eventually delisting from the U.S. stock market; or voluntarily delisting from the U.S. stock market and then listing again in Hong Kong or the mainland; other companies choose to accept U.S. regulation.
Analysis suggests that those companies that cannot comply with U.S. regulations may have to voluntarily delist. After the financial fraud incident of RuiXing Coffee, several Chinese stocks are rumored to be planning to delist from the U.S. stock market, such as Sina, Baidu, Sohu ChangYu, and Jumei YouPin.
However, analysis shows that it is also difficult for Chinese stocks to list in Hong Kong. According to statistics, only 34 of the Chinese stocks listed in the United States meet the financial requirements for listing on the Hong Kong Stock Exchange – a market capitalization of more than HK$40 billion, or a market capitalization of more than HK$10 billion and revenue of more than HK$1 billion.
The newspaper quoted an analyst as saying that the Chinese stocks listed in Hong Kong would face the arbitrariness of the Chinese Communist Party’s “turning the hand into a cloud, turning the hand into rain”.
Former China Bank of Communications financial planner Shi Huawei has said, “Hong Kong is now the territory of the Chinese Communist Party, the Chinese Communist Party wants to harvest how to harvest these leeks, the recent Chinese anti-monopoly measures, in fact, the Chinese Communist Party wants to meddle in Chinese enterprises.”
Currently, investors have little confidence in the mainland market. Since last year, the CCP has been putting pressure on Internet companies such as Alibaba and Tencent on anti-monopoly grounds, such as suddenly calling a halt to the IPO of Ali’s Ant Group; in late January requiring Alipay, Jingdong Finance, Drip Finance, Tianxing Finance, Du Xiaoman Finance and many other Internet platforms to completely remove bank deposit products; in mid-March officials “interviewed “11 Internet companies, etc.
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