The US Senate on Wednesday overwhelmingly approved legislation that could lead to Chinese companies such as Alibaba Group Holding Ltd (阿里巴巴) and Baidu Inc (百度) being barred from listing on US stock exchanges, amid increasingly tense relations between the world’s two largest economies.
The bill, introduced by US senators John Kennedy, a Republican, and Chris Van Hollen, a Democrat, was approved by unanimous consent and would require companies to certify that they are not under the control of a foreign government.
US lawmakers have raised red flags over the billions of US dollars flowing into some of China’s largest corporations, much of it from pension funds and college endowments in search of fat investment returns.
Alarm has grown in particular that US money is bankrolling efforts by Chinese technology giants to develop leading positions in everything from artificial intelligence and autonomous driving to Internet data collection.
If a company cannot show that it is not under such control or the US Public Company Accounting Oversight Board (PCAOB) is not able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges.
“I do not want to get into a new Cold War,” Kennedy said on the Senate floor, adding that he wants “China to play by the rules.”
“Publicly listed companies should all be held to the same standards, and this bill makes common sense changes to level the playing field and give investors the transparency they need to make informed decisions,” Van Hollen said in a statement. “I’m proud that we were able to pass it today with overwhelming bipartisan support, and I urge our House [of Representatives] colleagues to act quickly.”
Since discussions on increased disclosure requirements began last year, many Chinese companies have either listed in Hong Kong already or plan to do so, said James Hull, a Beijing-based analyst and portfolio manager with Hullx.
“All Chinese US-listed entities are potentially impacted over the coming years,” he said. “Increased disclosure may hurt some smaller companies, but there’s been risk disclosures around PCAOB for a while now, so it shouldn’t be a shock to anyone,” he said.
In a sign of broad support for the measure, US Representative Brad Sherman, a Democrat, introduced a companion bill in the House Committee on Financial Services.
Sherman said in a statement that NASDAQ this week moved to delist China-based Luckin Coffee Inc (瑞幸咖啡), after executives at the company admitted fabricating US$310 million in sales from April to December last year.
US House leaders are discussing the legislation — and a separate Senate-passed bill to sanction Chinese officials over human rights abuses against Muslim minorities — with lawmakers and members of the relevant committees, a Democratic aide said.
The Senate measure — S. 945 — is an example of the rising bipartisan pushback against China in Congress that had been building over trade and other issues.
It has been amplified especially by Republicans, as US President Donald Trump has sought to blame China as the main culprit in the COVID-19 pandemic.
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