The US stock market watchdog, the Securities and Exchange Commission (SEC), has added more than 80 companies to a list of entities at risk of exclusion from the US stock market, reports Reuters May 5. Chinese companies are particularly represented there due to Sino-American tensions.
Chinese companies stuck in US-China rivalry
The measure is temporary, but strong. More than 80 companies have been added to a dreaded SEC list of exclusion threats. Under a 2020 law, the Holding Foreign Companies Accountable Act, the regulator has the ability to remove from U.S. markets companies in foreign jurisdictions that fail to meet local audit standards for three years in a row.
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This warning mainly targets Chinese companies. In the latest list, the world’s largest solar panel manufacturer, Jinko Solar, the China Petroleum & Chemical Corp, the Bilibili site, the gaming company NetEase and the giant JD.com stand alongside.
The latter said on May 5 that “ The company will continue to comply with applicable laws and regulations in China and the United States, and strive to maintain its listed status on both the Nasdaq and the Hong Kong Stock Exchange. “.
These companies find themselves caught between Sino-American disagreements. While the United States demands more transparency on the audits of listed companies, China imposes extensive protection of their confidential information, in the name of national security.
Reuters recalls that in December the SEC estimated that 274 Chinese companies were at risk of being rejected from American stock exchanges by 2024. Enough to call into question hundreds of billions of dollars of American investments in these companies.
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China is aware of the problem. The Middle Empire is seeking a solution to this blockage with the United States. The two countries are discussing an operational agreement to cooperate on the supervision of audits.
Beijing could have a little less heavy hand on the confidentiality requirements imposed on its companies. China would also be ready to allow inspections by the audit regulator, the Public Company Accounting Oversight Board, on its territory, within the headquarters of the organizations concerned. The country appears to be one of the few that have so far refused.
On the Chinese side, the agreement is expected to be concluded in the course of 2022. In March, Reuters learned that the China Securities Regulatory Commission has summoned several local giants to prepare them to share more information during the audits. Among the companies present, Alibaba, Baidu, Weibo and JD.com, which should therefore be able to settle its dispute with the SEC soon.