US bill to delist Chinese companies from stock exchanges passes in House of Representatives
- The Holding Foreign Companies Accountable Act would punish firms that do not comply with auditing oversight rules
- The legislation now moves to US President Donald Trump’s desk for his signature, though he has not indicated whether he will sign it into law
US legislation aimed at removing Chinese companies from US stock exchanges for not complying with auditing oversight rules passed with a voice vote in the House of Representatives on Wednesday. It now moves to President Donald Trump, who has not indicated whether he will sign it into law.
The bill could lead to Chinese companies including Alibaba Group being forced off US exchanges if the companies fail to hand over their audits for inspection. Alibaba owns the South China Morning Post.
The Holding Foreign Companies Accountable Act was introduced in 2019 by Senator John Kennedy, Republican of Louisiana, to protect American investors from Chinese companies that lacked transparency.
The United States’ auditing supervisor, the Public Company Accounting Oversight Board (PCAOB), has been battling China for decades over its resistance to supply publicly traded companies’ audits for inspection. Beijing has cited state-secret laws as its reason for not complying.
“Enforcing disclosure laws here would be a welcome and overdue step,” said Derek Scissors, a researcher focusing on US economic relations with Asia at the American Enterprise Institute.
“Transparency is more important than the profits its critics are shielding,” said Scissors, referring to the resistance the legislation has gotten, including arguments that it would harm investors and capital markets in the US. “It is not a good-faith argument to say transparency in our investment in the People’s Republic of China is bad for the country.”
The outgoing Trump administration is still waging a concerted effort to get tough on China, both as part of its legacy and to try to put in place policies that may be difficult for President-elect Joe Biden’s administration to unwind.