Trump raises the stakes with plan to delist Chinese firms

Trump raises the stakes with plan to delist Chinese firms
Donald Trump with Chinese President Xi Jinping. The US leader’s latest move to limit Chinese firms comes ahead of trade talks between the two countries in early October. (AP)
Updated 29 September 2019

Trump raises the stakes with plan to delist Chinese firms

Trump raises the stakes with plan to delist Chinese firms
  • Growing security concerns around company activities prompt US stock exchange threat, sources say

WASHINGTON: President Donald Trump’s administration is considering delisting Chinese companies from US stock exchanges, three sources briefed on the matter said, in what would be a radical escalation of US-China trade tensions.

The move would be part of a broader effort to limit US investment in Chinese companies, two of the sources said. One said it was motivated by the Trump administration’s growing security concerns about the companies’ activities.

Major US stock indexes slipped on the news, which came days before China celebrates the 70th anniversary of the birth of the People’s Republic on Oct. 1, when the world’s No. 2 economy will shut down for a week of festivities.

It was not immediately clear how any delisting would work.

In June, US lawmakers from both parties introduced a bill to force Chinese companies listed on American stock exchanges to submit to regulatory oversight, including providing access to audits, or face delisting.

Chinese authorities have been reluctant to let overseas regulators inspect local accounting firms,  citing national security concerns.

“Beijing should no longer be allowed to shield US-listed Chinese companies from complying with American laws and regulations for financial transparency and accountability,” Republican Senator Marco Rubio said at the time.

One of the sources said the idea of delisting was the latest salvo in this longstanding dispute.

“This is a high priority for the administration. Chinese companies not complying with the PCAOB (Public Company Accounting Oversight Board) process poses risks to US investors,” the source said.

Any plan is subject to approval by Trump, who has given the green light to the discussion, Bloomberg reported, citing a person close to the deliberations.

Officials are also examining how the US could put limits on Chinese companies included in stock indexes managed by US firms.

No decision or action is imminent, two sources said.

As of February, 156 Chinese companies were listed on the NASDAQ and New York Stock Exchanges, according to US government data. 

NYSE declined to comment, while Nasdaq, MSCI, S&P and FTSE Russell did not immediately respond to requests for comment.

China’s yuan currency, traded in offshore markets, fell against the dollar after the news to trade near its weakest against the greenback in about three weeks.

Trade talks between the US and China are expected to be held on Oct. 10-11 after months of tit-for-tat moves by both sides that have weakened global growth.

While the idea of delisting could be a maneuver ahead of those talks, the main aim was to counteract the civilian-military fusion of Chinese tech firms, the Made in China 2025 industrial development program targeting key industries for domination, and a growing surveillance state in Xinjiang, one of the sources said.

The source said there are concerns about US capital enabling these activities, especially as the lines blur between state-owned and private companies in China.