Focus on the BIG picture.
Friday, Apr 25, 2025
Outside the box.
The Trump administration is contemplating the removal of Chinese companies from U.S. stock exchanges.
A possible change in policy may impact 286 Chinese firms whose total market capitalization stands at $1.1 trillion.
The Trump administration is considering the removal of Chinese companies from U.S. stock exchanges, which could affect 286 firms with a combined market value of around $1.1 trillion as of March 2025. Treasury Secretary Scott Bessent stated that all options, including delisting, are being contemplated as part of a larger strategy to tackle trade imbalances and national security issues.
This situation arises from a series of legislative and executive actions aimed at intensifying scrutiny on Chinese firms operating within the U.S. In December 2020, the "Holding Foreign Companies Accountable Act" was enacted, mandating that foreign companies grant access to their audit records for three consecutive years or risk delisting.
The law specifically targets firms that do not permit the Public Company Accounting Oversight Board (PCAOB) to review their audit reports, a requirement that has sparked contention with Chinese companies citing national security reasons.
Moreover, Executive Order 13959, signed in November 2020, bans U.S. investments in companies classified as "Communist Chinese military companies" by the Department of Defense.
As a result of this order, the New York Stock Exchange began the delisting procedure for China Mobile, China Telecom, and China Unicom in January 2021.
The potential delisting of Chinese companies carries broader consequences for global financial markets.
In response to U.S. regulatory measures, Chinese firms have increasingly pursued secondary listings in markets like Hong Kong and London to lessen the associated risks.
For example, the apparel company Shein has encountered difficulties with its planned U.S. initial public offering due to intensified regulatory scrutiny, leading to explorations of alternative listing options.
These actions are part of a wider U.S. government strategy to respond to national security concerns and ensure fair trade practices.
The administration has also implemented substantial tariffs on Chinese imports, with rates soaring to as high as 125%, and has cautioned allied nations against strengthening trade connections with China, labeling it a significant violator of global trade norms.
The escalating tensions have resulted in heightened volatility in global financial markets, causing notable fluctuations in stock and bond markets worldwide.
The situation continues to develop as both the U.S. and China navigate the intricate dynamics of their economic and political relationship.
This situation arises from a series of legislative and executive actions aimed at intensifying scrutiny on Chinese firms operating within the U.S. In December 2020, the "Holding Foreign Companies Accountable Act" was enacted, mandating that foreign companies grant access to their audit records for three consecutive years or risk delisting.
The law specifically targets firms that do not permit the Public Company Accounting Oversight Board (PCAOB) to review their audit reports, a requirement that has sparked contention with Chinese companies citing national security reasons.
Moreover, Executive Order 13959, signed in November 2020, bans U.S. investments in companies classified as "Communist Chinese military companies" by the Department of Defense.
As a result of this order, the New York Stock Exchange began the delisting procedure for China Mobile, China Telecom, and China Unicom in January 2021.
The potential delisting of Chinese companies carries broader consequences for global financial markets.
In response to U.S. regulatory measures, Chinese firms have increasingly pursued secondary listings in markets like Hong Kong and London to lessen the associated risks.
For example, the apparel company Shein has encountered difficulties with its planned U.S. initial public offering due to intensified regulatory scrutiny, leading to explorations of alternative listing options.
These actions are part of a wider U.S. government strategy to respond to national security concerns and ensure fair trade practices.
The administration has also implemented substantial tariffs on Chinese imports, with rates soaring to as high as 125%, and has cautioned allied nations against strengthening trade connections with China, labeling it a significant violator of global trade norms.
The escalating tensions have resulted in heightened volatility in global financial markets, causing notable fluctuations in stock and bond markets worldwide.
The situation continues to develop as both the U.S. and China navigate the intricate dynamics of their economic and political relationship.
