FIVE BIG Chinese companies exit Wall Street after failing to provide information on their financial audits to U.S. authorities, who have been requesting this information for more than three years.
Through separate bodies, state-owned companies China Life Insurance, PetroChina, Sinopec, Aluminum Corporation of China, and Sinopec Shanghai Petrochemical announced their “voluntary delisting” from the New York Stock Exchange (NYSE).
Altogether, the market value of the five outgoing companies is around $300 billion. The five Chinese companies claimed to have low U.S. returns and high administrative costs, however, the Securities and Exchange Commission (SEC) has since May warned that the five companies were being targeted for failing to meet auditing standards required by the U.S. agency.
Chinese companies refused to provide information about their financial statements arguing that disclosure of these audits would constitute a national security issue. For years, Chinese regulators have sought ways to shield Chinese companies from U.S. authorities.
Companies with false audits or existing only on paper have managed to penetrate the U.S. market and defraud hundreds or even thousands of U.S. investors in the past, forcing regulators to increase scrutiny of these companies.
Chinese companies are a pandora’s box for U.S. investors
Chinese companies are required by law to keep their audit papers within China’s borders, where they cannot be examined by foreign agencies.
The SEC can expel companies from being listed on a stock exchange if they fail to file audits of their financial statements for three consecutive years. China has for years refused to share information about its companies’ financial audits with U.S. regulators.
In April, Chinese regulators proposed to end the more than decade-old law that prohibits Chinese companies from sharing sensitive or financial information with agencies in other countries. This change would allow the SED to review financial audits of listed companies.
Even so, large companies such as Alibaba are considering preparing for a potential loss of access to U.S. credit markets.
China’s real estate sector has completely lost credibility among American creditors. Following the default of Evergrande – China’s second largest real estate company – on its debt payments, American banks have become skeptical about lending money to Chinese builders.
The SEC has listed 150 Chinese companies at risk of being delisted from the NYSE, including bona fide giants such as Alibaba, JD.com and Baidu.
The loss of access to U.S. capital for many of its companies is having a negative impact on the performance of the Asian giant’s already battered economy.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica