Washington is moving forward with intentions to delist Chinese-U.S. listed firms that refuse to follow their rules. Despite this, American investors continue to be increasingly exposed to shares in these Chinese stocks.
The U.S. Securities and Exchange Commission is planning on proposing a regulation by the end of 2020 that would result in Chinese firms from getting delisted from American bourses if they do not comply with their auditing standards, Bloomberg reported late Tuesday, citing people familiar with the situation.
Since August, SEC chairman Jay Clayton along with Treasury Secretary Steven Mnuchin, have been advocating regulators to pass new rules that could take effect after next year.
But there are two interesting developments to consider. One, Clayton plans on stepping down by the end of the year. And two the Biden administration is set to take over next year, meaning the Democratic President-elect is in charge of naming a new SEC chief.
While the potential rule change is unlikely to finalize before the next administration takes over, Clayton could force the SEC’s Republican and Democratic commissioners to state on the record whether they back the tightened regulations on Chinese firms or not, Bloomberg reports.
The move to potentially delist Chinese U.S.-listed firms comes after Luckin Coffee (Nasdaq: LK) allegedly fabricated more than $300 million in sales earlier this year. Since then, Washington has made efforts to crack down on Chinese companies to protect the American investor.
Although some are recovering, Chinese tech giants including Alibaba (NYSE: BABA; HKEX: 09988) Tencent (HKEX: 00700; OTC: TCEHY) stocks have taken a hit in the last week on Beijing unveiling new regulations to crack down on monopoly practices.
Still, the U.S. investor's exposure to shares of Chinese firms has continued to grow, according to the SEC. As of 2019, more than 150 Chinese companies with a combined valuation of $1.2 trillion traded on U.S. bourses, according to Bloomberg.