Exodus from NYSE: Scores of big China stocks are turning their backs on Wall Street

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• Five Chinese state-owned companies leave NYSE
• Conflict between the US and China smolders in the background
• Other big names in China could follow

More and more Chinese companies are withdrawing from Wall Street. Recently, the five Chinese state-owned companies China Life Insurance, PetroChina, Sinopec, Aluminum Corporation of China and Sinopec Shanghai Petrochemical announced in respective statements that they would give up their listing on the New York Stock Exchange (NYSE) by the end of the month. All five companies cited the low trading volume in the USA as well as the high costs and administrative obligations that would accompany the listing on the NYSE as a reason for this step. Instead, the five China giants now want to use their listings on the Hong Kong stock exchange, where foreign investors are also welcome, and mainland China.

Tensions between US and China

In its announcement, however, none of the companies addressed the elephant in the room, namely the increasing tensions between the USA and China, which may also be a reason for the sudden delisting from the NYSE. After all, the five companies are on the US Securities and Exchange Commission’s watch list for refusing to meet US testing standards.

The background is a conflict that has been smoldering between the USA and China for several years. The US Securities and Exchange Commission requires companies listed in America to give the US authorities access to company audit documents. China, on the other hand, requires Chinese companies traded on foreign exchanges to store audit records in mainland China, where they cannot be inspected by foreign authorities. The SEC, however, has the power to delist any publicly traded company that fails to submit audit documentation for three consecutive years.

For this reason, the five Chinese state-owned companies should have expected exclusion from the NYSE after the deadline anyway. However, as recently as April it appeared that a solution to the conflict could be found, as the Chinese authorities had proposed at the time that the rule in question be amended to allow US regulators to list Chinese companies listed on the NYSE are to check.

Will more Chinese giants follow?

Regardless, other China giants, such as non-governmental online retailer Alibaba, have meanwhile taken steps to strengthen their Hong Kong listings and prepare for a possible exit from the US. Alibaba announced in July that it intends to bring its secondary listing in Hong Kong on a par with its primary listing in the United States. Market observers saw the move as preparation for a possible US exodus. According to CNN, the US investment bank Goldman Sachs commented on the decision as follows: “An initial listing in Hong Kong gives Chinese ADRs (American Depository Shares) the option to diversify their listing risk and retain access to the public stock market”. After Alibaba took the plunge, other Chinese ADRs could follow suit, according to analysts at Citigroup. In June, the Chinese Uber competitor DiDi left the NYSE for Hong Kong.

The Chinese Securities and Exchange Commission only commented on the withdrawal of the five Chinese companies from the NYSE by saying that they were informed about the process and that it was “normal for companies to be listed or delisted from a market. We will continue to be in contact with foreign regulatory institutions stay and defend the rights of companies and investors together.”

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