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Risks in US-listed Chinese firms remain despite strong market cap, key American advisory panel says
- Warning underscores differences that continue to hamper Sino-US ties despite greater bilateral efforts at comity since Xi-Biden summit
- Chinese law requiring companies to ‘provide technical support and assistance to public security organs’ cited by commission
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An influential government advisory panel in Washington warned on Friday that risks tied to investments in US-listed Chinese companies persist even after a recent agreement between Beijing and an American regulator allowed them to remain on US exchanges.
The US-China Economic and Security Review Commission (USCC) noted in a report that total capitalisation of Chinese companies listed on US exchanges had risen by nearly a third since September, owing to optimism over the green light granted by the Public Company Accounting Oversight Board (PCAOB).
However, the USCC also flagged as continuing risks Beijing’s increased scrutiny of companies structured as variable interest entities, or VIEs – which account for more than half of US-listed Chinese companies – and those that “may support activities that are contrary to US national interests”, including microblogging platform Weibo.
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“Weibo works under government direction to censor posts on its blogging platform and is used by the central and local governments to surveil and censor public protests,” the commission said.
Anna Ashton, a director of research at political risk consultancy Eurasia Group, suggested that the USCC may have issued a warning about US-listed Chinese VIEs because its recommendations on the issue three years ago, which led to legislation that forced China to cooperate with PCAOB, called for a prohibition on such structures.
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