In a recent article in The Federalist entitled “Wall Street Loves CCP’s Multibillion-Dollar Lies,” Chinese-American financial expert Helen Raleigh pointed out that no matter how much Wall Street gives in to the CCP, they will never get the market access they want and will one day regret it.
The article points out that for years, Chinese companies have enjoyed open access to the U.S. capital markets, but these Chinese companies do not comply with the relevant U.S. laws when they list in the United States. And Wall Street firms have turned a blind eye to Chinese companies’ failure to follow the rules and have been willing to act as lobbyists for the Communist government to the detriment of U.S. and global investors. There are currently more than 250 U.S.-listed Chinese companies with a combined market capitalization of more than $2 trillion.
Rowley also said that the CCP has complete control over all sectors of China’s financial institutions and that it would never allow any private company, domestic or foreign, to dominate any sector of China, especially the financial sector. Therefore, she asserted, no matter how much Wall Street bends to the CCP for access to the Chinese market, they will never get the market access they want. One day, they may be crushed by the authoritarian regime they fattened up and regret it. Raleigh said the blocking of Ant Financial’s $40 billion IPO in Hong Kong and Shanghai is a living example.
Raleigh noted that in April, two Chinese companies listed in the U.S. were hit by major accounting scandals: Chinese coffee chain Luckin Coffee and one of China’s largest education providers, the “Good Future Education Group.
In 2019, Raleigh said, the one-year-old RuiXing received $645 million from investors for the huge credibility provided by its initial public offering on the Nasdaq stock exchange, which promised to soon overtake Starbucks as the world’s largest coffee chain. Earlier this year, RuiXing had a market capitalization of $5 billion and a share price of $51. However, on April 2 this year, the company admitted that its chief operating officer and several employees fabricated about 2.2 billion yuan ($310 million in contracts) in sales, or 75 percent of RuiXing’s financial statement sales for 2019, which were false. Thousands of investors, including many Americans, suffered significant losses when RuiXing’s stock price plunged more than 80 percent that day, shrinking its market value by more than $2 billion.
In the same month, according to another U.S.-listed company, Good Future Education Group, employees exaggerated the company’s sales by “falsifying contracts and other documents,” causing its stock price to fall 23 percent in one day and reducing its valuation by $1.8 billion.
Rowley commented that if Wall Street firms had done their due diligence before issuing stock, and if the Chinese government had allowed U.S. regulators to scrutinize them, the companies would not have been listed on U.S. exchanges and international investors would have been protected.
Rowley said some Chinese accounting firms are not doing a good job of supervising their Chinese corporate clients and are turning a blind eye to problems with their clients’ fabricated financial statements. As an example, she said that in 2019, a Chinese regulator found that a Chinese accounting firm called GP failed to disclose in its audit report that one of its firm’s clients had inflated its cash holdings by $4 billion. Fraudulent Chinese accounting firms like this one have made their way into the U.S. stock market with the help of Wall Street.
In 2018 alone, U.S. auditors refused to endorse 219 annual reports prepared by Chinese companies, according to the Wall Street Journal. According to Rowley, this means that these auditors either found serious problems with these reports or expressed concerns about the survival prospects of these Chinese companies.
In the wake of widespread revelations about China’s ties to Wall Street in the wake of the 2020 presidential election fraud, Zhai Dongsheng, now vice dean of the School of International Relations at Renmin University of China, has claimed that the Communist Party’s longstanding relationship with the U.S. was made possible by having “old friends” on Wall Street.
“What is the reason? We have people at the top, we have our old friends in the powerful inner circle of the United States!” The Biden camp “has a very close relationship with Wall Street,” said Zhai Dongsheng. You can see: Biden’s son was Trump said ‘you have a fund company in the world’. Who helped him build the fund company? Understand? It’s all bought and sold here.”
On Dec. 18, President Trump (R-Texas) signed The Holding Foreign Companies Accountable Act, under which shares of Chinese companies that have not been inspected by U.S. regulators for three consecutive years will be prohibited from trading. The House unanimously passed the legislation in early December, and it was approved with bipartisan support in the U.S. Senate in May.
Under the U.S. Securities Act, the work done by auditors of all publicly traded U.S. companies must be monitored and routinely inspected by U.S. regulators, Rowley said. However, the Chinese Communist Party has blocked U.S. regulators from inspecting Chinese companies on the grounds that national security is involved. She said, “This is a serious violation of investor protection.”
She believes the new bill could mean that Wall Street will be denied access to the lucrative trading profits of Chinese companies and even cut off their dreams of entering the Chinese financial market.
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