At the end of 2020, Trump signed the Foreign Company Accountability Act passed by the House and Senate, requiring the SEC to come up with specific regulatory proposals within 90 days, and on March 24, the SEC issued new rules targeting Chinese companies listed in the U.S. The new rules improve the information disclosure rules and require Chinese companies listed in the U.S. to: i) meet U.S. auditing standards; ii) disclose the identity of party members on the board of directors; and iii) certify themselves that they are not controlled by the Chinese Communist Party. The rule requires Chinese companies already listed in the U.S. to face the risk of delisting if they do not comply with U.S. auditing standards for three consecutive years. As a result of the news, U.S.-listed Chinese stocks have continued to plummet, with shares of Heilongjiang, Tencent Music, and Vipshop declining in value over several trading days, and Baidu continuing to fall, with Heilongjiang falling another 10 percent on April 5, currently at $28.76 per share, down 80 percent from a high of $149.05 in January, with market value shrinking from $38 billion to $7.3 billion, a shrinkage of 200 billion yuan.
The full decoupling between China and the U.S. has entered the practical stage from discussions before last year, such as diplomatic closures of embassies and consulates, closing of Confucius Institute, arms race and high-tech embargo. A Pew survey shows 89% of Americans consider China an enemy or competitor, not a partner. Gallup polls show that Americans’ favorable view of China has fallen to an all-time low of 20 percent, the lowest point since 1979. Based on the sea change in public opinion, both the House and Senate in Congress have passed unanimously or with high votes on numerous sanctions to curb China bills. On the one hand, China and the United States were originally closely linked in the industrial chain, and the United States is highly dependent on China for rare earths, and Professor Jin Canrong, the “State Master”, called for the cessation of rare earth exports to the United States a few years ago. The United States plans to establish a chip industry chain with Taiwan, Japan, Europe and South Korea, TSMC is ready to establish a high-end chip factory in the United States; the United States and India, Japan, Australia is rebuilding the pharmaceutical industry chain, the latest results are the United States pharmaceutical companies to provide formulas, Japan’s financial and technical support, Australia’s transport support, India has become the largest production site of the new crown vaccine. In the financial sector, the most convenient decoupling is the stock market, the United States and foreign companies can not be listed in the A-share, China has more than two hundred companies listed in the United States, the future implementation of the new rules, a large number of Chinese have to delist, especially since the evidence is not controlled by the Chinese government this article.
China built a quasi-international board is also difficult to cope with
Faced with the decoupling of the US and Chinese stock markets, Chinese and Chinese-funded companies have had to respond, with some choosing to go private in the US and then return to the A-share market, such as Qihoo 360, and some choosing to list twice in Hong Kong, such as Alibaba, Jingdong and NetEase.
At the end of last month, Reuters reported that China was proposing to build a new stock exchange, mainly to allow companies listed in the U.S. to return and foreign companies in China, such as Tesla and Apple, to list on the new exchange. Since China’s yuan is not yet a freely convertible currency, it’s hard to see how the report could be fully open to foreign companies, and I think it could only be called a “quasi” international board. The reason why the authorities have this idea is, of course, the first priority is to deal with the decoupling of the U.S. and Chinese stock markets; second, to provide a shelter for the aforementioned returning companies; and third, to strengthen the economic ties between the U.S. and China, so that you have me and I have you, so that the U.S. cannot decouple. The reality is just that there is you in the U.S. stock market and there is no U.S. in your stock market. Fourth, from the positive perspective of following WTO rules and the internationalization of the RMB, the establishment of a quasi-international board is necessary, on the other hand, Chinese companies can be listed in the United States, the United States does not have a company listed in China, the United States allows Chinese companies to delist or fine, China does not have any “reciprocal retaliation” means; fifth, the Hong Kong factor. Hong Kong in 2019, there are many countries and institutions do not regard Hong Kong as a free economy, which has a great impact on Hong Kong’s status as an international financial center. Although the rules of the Hong Kong Stock Exchange have not changed, Hong Kong’s ability to raise capital is still much weaker compared to two years ago. The Heritage Foundation’s World Economic Freedom Index for 2021, Hong Kong was removed from the rating for the first time. Hong Kong’s future prospects as an international financial center are in doubt, and the financing capacity and function will be correspondingly weakened significantly, which is the motivation for building a new quasi-international board.
In the absence of freedom, at least economic freedom guarantee, it is simply impossible to appear international financial center, even if there will be gained and lost, more than 70 years ago, the international financial center Shanghai, now Hong Kong, those who make the international financial center disappeared for reasons that do not disappear; international financial center will disappear.
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