Trump signs bill that could delist Chinese firms from US markets

US President Donald Trump signed into law on Friday the Holding Foreign Companies Accountable Act, which will remove Chinese companies from American stock exchanges if they fail to comply with US auditing oversight rules within three years.

The law, which applies to all foreign companies listed on US exchanges but is widely regarded as being directed at Chinese firms, is the latest move from Washington targeting some of the biggest players in China’s economy.

The new trading law will affect nearly all Chinese companies listed on US exchanges, none of which now comply with the US auditing rules. Most other foreign companies on US exchanges are already in compliance, but Chinese law prohibits Chinese-based companies from doing so. As of October 2, 217 Chinese firms with a combined market capitalisation of US$2.2 trillion were listed on major US stock exchanges, according to the most recent congressional report by the US-China Economic and Security Review Commission.

Chinese firms for years have been using American capital markets and dollar-based finance as a key funding component to grow their businesses. While the measure includes a phase-in period, with penalties kicking in after three straight years of noncompliance, it could impose real damage on Chinese companies that fail to meet the audit standards.

“U.S. policy is letting China flout rules that American companies play by, and it’s dangerous,” Republican Senator John Kennedy of Louisiana, a lead sponsor of the new law, said in a statement.

Foreign Ministry spokeswoman Hua Chunying told reporters in Beijing after passage of the House bill that China was “against politicizing securities regulation” and urged cooperation to protect investors’ rights.

“It will undermine global investors’ confidence in the U.S. capital markets and will undermine the U.S. capital markets’ global standing and hurt U.S. interests,” Hua said.

Trump’s signing of the law capped a flurry of recent steps against China, including guidelines that would limit travel visas for 92 million Communist Party members. Any of them with a 10-year visa would now see it reduced to one month.

The U.S. Department of Homeland Security has said that customs officers at American ports would impound “shipments containing cotton and cotton products originating from” the Xinjiang Production and Construction Corps., a military-affiliated entity that’s one of China’s largest producers. This follows earlier U.S. action against the company that bars it from making any transaction with American companies and citizens.