Compel Chinese companies listed in US to disclose party links, Congress urged
- Influential US-China Economic and Security Review Commission wants tougher rules for Chinese companies publicly listed in the US
- Lack of disclosure and oversight ‘opens the door to adverse activities’
Chinese companies publicly listed in the United States should be forced to disclose any financial or political ties to Beijing, a US congressional body recommended on Thursday.
The US-China Economic and Security Review Commission (USCC) called on Congress to enact legislation requiring Chinese companies to include details of any government subsidies, loans or grants they receive, the conditions under which that support is provided and whether the company hosts a Chinese Communist Party committee.
In its annual report, the USCC said Chinese companies should also be prohibited from issuing securities on US stock exchanges if regulators were denied “timely access” to audit papers relating to the firms’ operations in China and if the companies used corporate structures to circumvent the country’s restrictions on foreign direct investment.
So-called variable interest entity structures are used by some Chinese companies to allow them to list in the US via an affiliated foreign company that operates through a contract rather than by direct ownership.
“The lack of disclosure by and oversight of US-listed Chinese companies opens the door to adverse activities, such as insider trading, accounting fraud, and corporate governance concerns that could put US investors, including pension funds, at risk,” the report said.