7/23/2023 0 Comments Utime limited ipoBeijing’s regulators have the attention of firms on this and other rules. The Chinese government has tightened data security laws, making it illegal to share information with foreign investigators. Hong Kong’s exchange only began permitting this in 2018.Ĭhinese companies may be losing this option. exchanges permit different classes of shares, allowing founders, for example, to maintain control over a company even if others “own” more of the company. is prestigious because firms must meet certain minimum standards of size and accountability. 1) Capital costs less because of the large pool of potential investors. Why do Chinese firms list in the U.S.? Three reasons are often given. Twenty years later, Alibaba shattered the IPO record set by Facebook by bringing in more than $22 billion. In 1994 it raised $333 million with its New York Stock Exchange initial public offering (IPO). The first Chinese company to list on the New York Stock Exchange was Shandong Huaneng Power. The charts below are about the more than $1 trillion invested in the more than 250 companies listed on U.S. He noted that most investors priced the increased risk into the shares of Chinese companies. Beijing University accounting professor Paul Gillis discussed them with us in 2013 ( web | YouTube). These tensions have existed for a long time. responds that its obligation is to the integrity of the market and that it must do what it can to ensure the validity of audits. access to it could jeopardize Chinese security. It further argues that some audits involve sensitive information and that allowing U.S. government to investigate the work of Chinese citizens on Chinese soil. The Chinese government argues that it cannot permit the U.S. This means those companies are not held to the same standards other listed companies must meet. These pressures stem from the refusal of China’s government to permit the SEC and the Public Company Accounting Oversight Board (PCAOB) to examine the audits conducted by firms of U.S.-listed Chinese companies. This month the SEC initiated investigations of several listed companies, including Yum China, the parent company of KFC in China, and biotech giant BeiGene, as a first step to ordering the firms to be delisted. A year later, the Securities and Exchange Commission (SEC) finalized rules to implement the law. investors and restricting Chinese firms’ access to U.S. But in December 2020, Congress passed the Holding Foreign Companies Accountable Act as a way of protecting U.S. The White House and the Pentagon said they’d acted out of security and human rights concerns. As a result, many firms on those lists were dropped from well-known indices maintained by MSCI, S&P Dow Jones and FTSE Russell and the funds that track them. entities to not invest in dozens of companies alleged to have links to China’s military or surveillance programs. Last June, President Joe Biden ordered U.S. Department of Defense listed a number of companies said to be tied to the Chinese military. China’s three telecommunications giants and one of its major oil firms were delisted. In November 2020, then President Donald Trump issued an executive order mandating the delisting of companies associated with China’s military. has threatened to punish China if it helps Russia evade sanctions.īut another looming worry for these Chinese companies and their investors has been the possibility that some or all of the firms will be “delisted” from U.S. Another factor is the potential economic fallout from the war in Ukraine. Much of the volatility stems from renewed worries about the impact of the pandemic and China’s zero covid mitigation measures (e.g., lockdowns, travel restrictions) on the country’s economy. This month alone it collapsed by a third before partially recovering as companies spent tens of billions of dollars to buy back shares. From 10,571 at the start of 2020, the index rose 94% by February 2021. The NASDAQ Golden Dragon China Index tracks these companies. Investors in Chinese stocks listed on American exchanges have lived with more than the usual uncertainties for a year and a half. Subscribe to our weekly newsletter to get it delivered straight to your inbox!
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