Chinese companies facing Wall Street crackdown

US Securities and Exchange Commission roll out regulations to scrutinize the books of listed foreign firms

Washington regulators have been accused of targeting Chinese companies listed on Wall Street. The move by the US Securities and Exchange Commission will force foreign firms to provide access to financial audits or risk being delisted.

Chinese technology companies are considered particularly vulnerable to the new measures with their shares falling sharply on Asian markets on Thursday.

“It is clearly discriminatory against Chinese companies listed in the US. It is wanton political suppression,” Foreign Ministry spokeswoman Hua Chunying said.

In response, the SEC pointed out that Beijing has constantly denied Wall Street regulators access to the books of Chinese firms.

The facts:

  • The Holding Foreign Companies Accountable Act plugs what critics have argued are major loopholes.
  • It is aimed at delisting Chinese companies if they fail to comply with US auditing standards for three years in a row.
  • Chinese technology companies are already facing a crackdown at home.
  • Beijing has launched an antitrust investigation and has targeted the fintech sector for “systematic risks.”
  • Big tech groups such as Alibaba and Tencent have come under scrutiny.

What was said: “[The decision] deprives US investors in sharing in Chinese businesses’ growth. We urge the US to provide a fair environment for all businesses listed there,” Foreign Ministry spokeswoman Hua said in a statement.

Reaction to the news: “A lot of investors thought the US and the [Joe] Biden administration would be more amicable towards China. But this news shows that it is going to be just as tough,” Louis Tse, the managing director at brokerage Wealthy Securities, said as reported by the Reuters news agency.

Delve deeper: Washington has rolled out broader sanctions against Chinese companies because of their pierced links to the Chinese Communist Party government. “China doesn’t want [companies] to disclose anything for national security reasons. That is a very big question that has to be answered by the Chinese side,” Tse told the Financial Times.

China Factor comment: The move by Washington regulators was always on the cards. Expect Beijing to retaliate.