© Reuters. FILE PHOTO: Chinese and US flags flutter near the Bund in Shanghai
By Patricia Zengerle
WASHINGTON (Reuters) – The US House of Representatives on Wednesday passed law that could prevent Chinese companies from listing their shares on US stock exchanges unless they comply with US auditing standards.
The measure was passed unanimously after being passed by the Senate and sent to the White House earlier this year. President Donald Trump is expected to sign the law.
The Holding Foreign Companies Accountable Act prevents the securities of foreign companies from being listed on a US stock exchange if they have failed to meet US Public Accounting Oversight Board audits for three consecutive years.
While it applies to companies from any country, the legislation is aimed at Chinese companies like Alibaba (NYSE :), technology company Pinduoduo (NASDAQ 🙂 Inc. and oil giant PetroChina Co Ltd ..
Measures that exacerbate China's business and trade practices generally pass Congress with wide margin, as both Democrats and Trump's Republicans repeat the president's tough line against Beijing.
Democratic Senator Chris Van Hollen, who co-drafted the bill with Republican Senator John Kennedy, said in a statement that American investors "have been cheated of their money after investing in seemingly legitimate Chinese companies that do not meet the same standards as correspond." other listed companies. "
Kennedy said China used US stock exchanges to "exploit" Americans. "The House, along with the Senate, has opposed a toxic status quo," he said in a statement.
The law would also require public corporations to disclose whether they are owned or controlled by a foreign government.
A closer examination could prevent other Chinese companies from being listed in the US, say industry participants. Such listings reached a six-year high this year.
Chinese Foreign Ministry spokeswoman Hua Chunying said ahead of the vote that it is a discriminatory policy that politically suppresses Chinese companies.
"Instead of putting layers of barriers in place, we hope the US can provide a fair and non-discriminatory environment for foreign companies to invest and operate in the US," said Hua at a press conference.
The Chinese authorities have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns.
Officials from the Chinese Securities and Exchange Commission said earlier this year that under certain circumstances they would be willing to allow examination papers to be inspected, but previous dispute settlement arrangements have not worked in practice.
Shaun Wu, a Hong Kong-based partner with Paul Hastings law firm, said heightened enforcement against Chinese companies was likely, although Democrat Joe Biden will become president in January.
He said that when the bill goes into effect, "all US-listed Chinese companies will face increased scrutiny by US authorities and will inevitably consider all available options."
This could include listing in Hong Kong or elsewhere, he said. Several Chinese companies listed in the US, including Alibaba and KFC China operator Yum China, recently carried out secondary listings in Hong Kong.
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