China’s JD.com, Pinduoduo, Bilibili, and NetEase are facing expulsion from American exchanges, and added to the US Securities and Exchange Commission (SEC) list of entities of deceitful practice.
On Wednesday May 5, 2022, the SEC added over 80 firms to its list under The Holding Foreign Companies Accountable Act. The Act became law on December 18, 2020 under former US President Donald Trump. It aims to remove foreign companies in US territory that fail to provide audits for inspections three years in a row.
The US and China have been in a long dispute, where the US regulators have been demanding that Chinese businesses registered in the US provide full access to their audits that are stored in China. The request was denied by China stating that it could be a national security concern. Fang Xinghai, the vice-chair of the China Securities Regulatory Commission (CSRC), stated at the Boao Forum for Asia annual conference 2022 that both countries’ regulators were working on an audit deal which they had planned to sign later this year.
But this latest development casts doubt on the chances of auditing cooperation talks between Chinese and US securities regulators that are said to be underway being successful.
Several Chinese corporations have either left or are intending to leave the United States stock exchanges. Following a Trump administration order prohibiting Americans from investing in the companies, China Mobile, China Telecom, and China Unicom left the New York Stock Exchange in early 2021.
One of the companies on the SEC’s list is JD.com which is a Chinese e-commerce company and one of the largest retailers in its home country. In a statement released on May 6, a spokesperson said they were aware of the company being on the list and were working on possible solutions.
For a long time, China has chosen a calculated approach to dealing with US measures aimed at Chinese companies listed in the United States. The US listing benefits Chinese enterprises in the long run, as well as the Chinese economy.
This list has bolstered the seriousness of the SEC’s position on Chinese companies. Some may be wondering what will happen if some Chinese firms no longer have US stock.
JD.com, Bilibili, and NetEase, which are among the Chinese companies on the SEC’s list, already have secondary listings in Hong Kong. This can be seen as an alternative survival against US action, and more Chinese companies may turn to Hong Kong or other Asian stock exchanges as a backup.