Alibaba drops as Senate passes Chinese oversight bill

Marco Green
May 23, 2020

In the wake of the U.S. Senate unanimously approving a bill that could lead to the delisting of some Chinese stocks on U.S. exchanges, Chinese companies are scrambling to respond to the threat.

"The Holding Foreign Companies Accountable Act" passed by rare unanimous consent on Wednesday.

The bill still needs to pass through the Congress Although the US Senate has introduced and passed the bill to delist Chinese companies, it still needs to pass through the Congress and be signed by Trump to become law. Should the company be unable to prove itself, the alternative will be to allow a US Oversight board to audit the company's accounts for the past three consecutive years.

The measure also would require public companies disclose whether they are owned or controlled by a foreign government.

Alarm has grown in particular that U.S. money is bankrolling efforts by Chinese technology giants to develop leading positions in everything from artificial intelligence and autonomous driving to Internet data collection.

It appears that the USA is finally fed up with China's refusal to permit the Public Company Accounting Oversight Board (PCAOB) to review audits of their companies, many of which list on United States security exchanges, including NASDAQ and NYSE. This poses a substantial risk to Americans who want to invest in such companies.

"Publicly listed companies should all be held to the same standards, and this bill makes common sense changes to level the playing field and give investors the transparency they need to make informed decisions", Bloomberg reported Van Hollen as saying. These companies have a combined capitalisation of over $1.8 trillion.

There were 172 Chinese companies listed on US exchanges that were valued at more than $1 trillion as of September a year ago, according to the U.S.

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The legislation may also ban Chinese companies from raising funds from American investors, reports a popular website.

What happened with Luckin Coffee?

A deliveryman walks past a closed Luckin Coffee store in Beijing, China, on February 7, 2020.

The Chinese coffee chain has since sacked its chief executive and chief operating officer, while six other employees who were alleged to have been involved in or known about the transactions have been suspended or put on leave. In April, the company's shares plummeted by over 80 per cent after fake transactions to the tune of $310 million were revealed, which made it look like the firm was experiencing rapid growth.

"The number of Chinese companies considering public floats in the USA will drop in the short term". Although the proposed law applies to all foreign countries, it is targeted at China.

Sen. John Kennedy, who sponsored the bill: "The Chinese Communist Party cheats, and the Holding Foreign Companies Accountable Act would stop them from cheating on USA stock exchanges."We can't let foreign threats to Americans' retirement funds take root in our exchanges".

Shares in some of the biggest US-listed Chinese firms, including Baidu and Alibaba, slid Thursday in NY while the broader market gained. John Kennedy (R-LA) and Chris Van Hollen (D-MD) - are pragmatic in their approach.

Kennedy said the aim isn't to start a rift with China.

A picture taken on March 30 shows a billboard bearing Chinese President Xi Jinping's face looking down over a boulevard next to the words "Thank you brother Xi", a message paid for and by a pro-government tabloid.

Alarms have been raised by USA lawmakers that billions of dollars have been flowing into some of China's largest corporations and that much of it is from pension funds and college endowments. But he noted a drawback to increasing oversight would be that these companies would simply say, "Okay, we'll move to London or we'll go to Hong Kong". The US has quite often resorted to trade and economic means to suppress China, he said.

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Other reports by Click Lancashire

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