The US House of Representatives is set to vote next Wednesday on a bipartisan bill that would impose restrictions on Chinese companies listed on US exchanges, including requiring them to provide proof that they are not controlled by a foreign government.
The bill was co-sponsored by Republican Senator John Kennedy of Louisiana, Republican Kevin Cramer of North Carolina and Democratic Senator Chris Van Hollen of Maryland.
The bill’s sponsors say the aim is to ensure that foreign companies listed in the United States meet the same independent audit requirements as U.S. companies. The move could pull Chinese companies including Alibaba Group Holding Ltd. and Baidu Inc. out of the U.S. stock market.
Under the bill, a company’s securities would be banned from trading on U.S. exchanges if it could not prove that it was not controlled by a foreign government, or if the Public Company Accounting Oversight Board (PCAOB) could not audit it for three consecutive years.
Bloomberg reports that the Foreign Companies Accountability Act (Section 945) will be considered next Wednesday under a streamlined process that limits House debate and allows no changes, but requires the approval of two-thirds of the lawmakers present and voting to pass.
On May 20 of this year, the U.S. Senate unanimously passed the Foreign Corporation Accountability Act.
Bloomberg noted that the current schedule in the House of Representatives for a fast-track vote, normally reserved for noncontroversial matters, indicates the bill has qualified bipartisan support. If the House approves it, it would be eligible for President Trump’s signature.
“Current policies that allow Chinese companies to ignore the rules that American companies play by are harmful,” Senator John Kennedy, A Louisiana Republican, said in a statement On Saturday. This endangers American colleges and retirement savings, putting American families and workers at risk. My colleagues on both sides of the aisle recognize the fact that we have a solution.”
The issue has dogged U.S. regulators for more than a decade, and China has refused to let PCAOB inspectors review the audit manuscripts of U.s.-listed Chinese companies such as Alibaba and Baidu. The issue has taken on greater urgency amid heightened tensions between China and the U.S. and a high-profile accounting scandal at Luckin Coffee Inc. this year.
If the bill becomes law, it would give Chinese companies and their auditors three years to comply with inspection requirements before they could be delisted from the U.S. stock market.
China had criticized the bill, saying there was a better way to resolve differences between Washington and Beijing over audit inspections and that delisting Chinese companies would hurt US capital markets.
In may this year, the China Securities Regulatory Commission, head of the relevant departments on the us senate through the foreign companies accountability act issues, said at a regular press briefing from the legislation and the relevant people’s comments, some of the bill’s provisions content directly to China, rather than on securities regulation of the professional consideration, we are firmly opposed to the idea of politicizing securities regulation.
‘We believe that the bill completely ignores the fact that Chinese and U.S. regulators have been trying to strengthen cooperation on audit supervision for a long time,’ said the head of the CSRC. China has always attached great importance to china-us cooperation in capital market audit and supervision. In 2017, We assisted the PCAOB in carrying out a pilot inspection of a Chinese accounting firm, and since 2019, we have repeatedly put forward specific proposals to the PCAOB on joint inspection of accounting firms. We look forward to a positive response from us regulators and call on the two sides to speed up joint inspections of relevant accounting firms through equal and friendly consultation in accordance with international norms governing cross-border audit cooperation.
The head of the CSRC also pointed out at the time that the bill would damage the interests of both sides, not only preventing foreign companies from listing in the US, but also undermining the confidence of global investors in the US capital markets and its international standing. High-quality listed companies are an important resource for the competition in capital markets of various countries. We believe that international investors will make their own wise choices according to the needs in line with their best interests. It is hoped that relevant parties in the US will act in a professional spirit, work in the same direction with China, and deal with regulatory cooperation in accordance with the principles of marketization and rule of law. We will take concrete actions to advance china-U.S. cooperation on audit supervision, promote early consensus and jointly protect the legitimate rights and interests of investors.
Bloomberg reported earlier in November that the Planned House vote comes as the Securities and Exchange Commission is examining possible parallel regulatory actions that could lead to the Delisting of Chinese and some other foreign companies for failing to comply with U.S. audit rules.