On Dec. 3, 2021, U.S.-listed Chinese stocks plummeted, with total market capitalization evaporating $108.3 billion overnight. Pictured is the New York Stock Exchange.
U.S.-listed Chinese stocks plunged on Friday (3 December) after the official implementation of the U.S. Foreign Company Accountability Act (HFCAA), with their total market capitalization evaporating $108.3 billion overnight. Shares of Dropshipping, which is about to be delisted from the U.S. stock market, fell 22 percent.
The U.S. Securities and Exchange Commission (SEC) announced on Thursday (Dec. 2) the adoption of a regulatory amendment that requires more information disclosure by U.S.-listed Chinese companies. As a result, U.S.-listed Chinese stocks saw a collective plunge on Friday. The Nasdaq Golden Dragon China Index, which measures the performance of Chinese stocks as a whole, closed 9.12 percent lower.
Among the popular Chinese stocks, Alibaba and Jindo shares fell more than 8%, Jingdong, Baidu and Beili Beili fell more than 7%, Azera fell more than 11%, Xiaopeng Auto fell more than 9%, Ideal Auto and Akiyoshi fell more than 15%, Ctrip fell more than 12%, Misty Core Technology fell more than 16% and Dingdong Buyer fell more than 18%.
According to the Huaxia Times on Saturday (4), 274 Chinese stocks with a total market value of $1,335.5 billion plunged on Friday, losing $108.3 billion (about 690.5 billion yuan) overnight. Among them, Alibaba’s latest market capitalization was about $303.5 billion, with an overnight loss of $27.2 billion (about 173.4 billion yuan).
SEC requires Chinese stocks to comply with U.S. rules
Notably, DDT shares closed plunged 22%, shrinking its market cap to about $4.8 billion. Compared to the $14 issue price, the cumulative drop in DDT shares has reached 56%.
The market generally believes that the “avalanche” of Chinese stocks is triggered by the introduction of the “Foreign Company Accountability Act” in the United States.
On Dec. 2, the U.S. Securities and Exchange Commission (SEC) finalized its plans to implement a new law, saying in a statement that it adopted amendments to finalize the rules filed under the Foreign Company Accountability Act (HFCAA) aimed at ensuring that foreign companies listed in the U.S., particularly Chinese companies, comply with U.S. rules.
The SEC said Chinese companies listed on U.S. stock exchanges must disclose whether they are owned or controlled by a government entity and provide evidence of their audit examinations.
Unlike many countries, the CCP does not allow the SEC’s accounting body, the Public Company Accounting Oversight Board (PCAOB), which oversees its audits, to PCAOB) to oversee its audits.
DDT’s announcement Friday that it will “immediately” begin the process of delisting from the New York Stock Exchange and moving to Hong Kong has sparked global concern. According to foreign media analysis, DDT’s delisting could mean the end of the era of large Chinese companies raising capital in the United States.
On Dec. 3, Chinese Foreign Ministry spokesman Zhao Lijian said the U.S. approach is a “political crackdown” on Chinese companies and a “curb on China’s development.
However, DDT has been under intense regulatory pressure from authorities since its U.S. IPO.
Communist Party Demands Chinese Companies “Must Obey Party Laws”
According to separate reports by Bloomberg and Reuters, Chinese Communist Party regulators have asked DDT to delist from the U.S. exchange due to concerns about sensitive data leaks.
DDT, which has 580 million users, was severely cracked down by the Chinese Communist Party authorities immediately after its successful listing on the New York Stock Exchange on June 30 this year. Only 10 days after the listing, DDT’s market value evaporated over $20 billion.
In addition to DDT, the Chinese Communist authorities have opened investigations into a number of concentration cases on the grounds of the Anti-Monopoly Law, involving Tencent, Suning, Meituan, Alibaba and other Internet companies.
Zhu Ming, a New York-based current affairs commentator, has said that in anticipation of the U.S. requirement that Chinese companies meet the established requirements of other companies and comply with the regulations of U.S. listed companies, the Chinese Communist authorities have become increasingly domineering, demanding that Chinese companies must comply with the Party’s laws and pay a steep price for disobedience even if they are already listed outside of China.