On Sunday, China's securities monitoring body criticized a U.S. policy that could bar Chinese companies from trading in U.S. shares, saying the government would politicize regulation and harm both nations.
The U.S. Senate passed bills that will prohibit certain Chinese companies from selling their securities on U.S. markets, unless they meet U.S. audit and regulatory requirements.
Throughout the years, US investors have poured billions of dollars into US-listed Chinese companies, from giants like Alibaba and Baidu to emerging players like Pinduoduo and Bilibili.
This could transform soon with the Holding Foreign Companies Accountable Act, a new legislation passed this week with bipartisan backing to put more teeth on accounting rules on foreign corporate entities, with China apparently at the crosshairs.
The China Securities Regulatory Commission has responded to Washington's audit plan on Sunday, citing the legislation could stymie global investors in U.S. capital markets and unprofessional considerations of good securities regulation.
Judged from the proposal and comments made by relevant people in the US Congress, some of the bill's provisions are intended specifically for Beijing, rather than on the basis of professional evaluation in the regulation of securities, the CSRC disclosed in a statement on its official website.
Citing a stipulation prohibiting foreign issuers from trading US securities if they don't meet the standards required in U.S. auditing for three straight years with the Public Company Accounting Oversight Board, the CSRC stressed the proposal has neglected both countries' long-term attempts to improve ties on audit regulation.
According to Democratic Rep. Brad Sherman of California, who leads the House of Representatives initiative to require Chinese companies to adhere to U.S. securities regulations, or be barred from raising capital in U.S. stock markets, the time has long passed for Washington to compel Chinese companies to provide the same investor safeguards that U.S. firms have for decades.
In a statement released by the CSRC on Sunday, it said they are firmly against the act of politicizing the securities measure, as some conditions in the bill is directly aimed at Chinese companies rather than considering professional securities regulations.
The new proposal will mandate public entities in the U.S. to be transparent about whether they are controlled or owned by a foreign government, including the communist government of China.
Chinese companies still have a three-year timeframe to figure things out, but they are already being subjected to more rigid scrutiny. Just recently, the Nasdaq made public to delist Luckin, the Chinese coffee group that admitted to making up $310 million in revenues.
All companies that are listed on nations where the PCAOB has no jurisdiction to carry out its auditing requirements has a total market value of over $1.8 trillion.
