US Senate Passes Bill: Higher Chances Of Delisting Chinese Companies

The U.S Senate has unanimously passed a bill for the “Holding Foreign Companies Accountable Act” introduced by Senators John Kennedy and Chris Van Hollen, aimed at implementing stricter regulations and audits in the U.S Stock Exchanges. This new legislation could possibly prevent the involvement of many Chinese companies like Alibaba Group Holding Limited and Baidu Inc. in the American share markets.

The new law requires publicly traded companies to state whether they are owned and controlled by a foreign government. The regulation applies to all foreign companies and if any of them are unable to establish that they are not owned or controlled by foreign government, its securities will be removed from the Stock market. In addition, foreign companies are also required to submit audit reports conducted by the Public Company Accounting Oversight Board. Failure to do the above for three consecutive years may result in delisting of the company.

Although applicable to all foreign companies, a Republican has stated that this step is primarily aimed at debarring Chinese companies from raising capital investments from the U.S economy.  The apparent turnout of events expose the US-China feuds as the discussion entails criticisms on Beijing and the law is believed to be one of its consequence. The American senators claim that this new system will only guarantee a level playing field and an opportunity for companies to make a more informed decisions and also insist that China shall “play by the rules”. This is also affirmed as an attempt to avoid another billion dollars’ losses to the U.S investors in the backdrop of Luckin Coffee sham – a Chinese venture that fabricated its sales returns in 2019 which is likely to be removed from NASDAQ soon. The long-simmering hostilities have worsened in the wake of Coronavirus pandemic, as U.S President Mr. Donald Trump has continuously blamed China for the same.

The Bill was first introduced in March 2019 owing to the inability of the U.S Security Regulators to inspect the audit of the foreign firms, especially Chinese companies. It is yet to be passed by the House of Representatives before the President can assent to it.