The United States of America is not stopping from landing incessant sucker-punches on the dragon. In the long list of counter-measures that have been initiated against China in the backdrop of the Coronavirus pandemic, the Secretary of State Mike Pompeo has now warned American investors against “fraudulent” accounting practices of Chinese companies and also announced that countries around the world shall follow NASDAQ’s recent decision to tighten listing rule for Chinese companies in the stock exchange.
Delisting of Companies
Beijing does not allow the American authorities to examine the audit-books of the listed Chinese companies. The conspicuous Dragon claims that the audit-books are national secrets and cannot be shared with other parties.
The US Senate has passed a bill, which if signed into law can lead to as many as 800 Chinese companies getting delisted. Chinese majors like Alibaba and Baidu are set to be the worst-hit.
The moment the bill becomes a law, the United States will be able to block capital market access to Chinese companies. Averting the ‘Chinese Hustle’ whereby Chinese companies have been cheating the American investors all this while through securities fraud.
The Chinese Communist Party cheats, and the Holding Foreign Companies Accountable Act would stop them from cheating on U.S. stock exchanges.
We can’t let foreign threats to Americans’ retirement funds take root in our exchanges. pic.twitter.com/71dYQxTgiR
— John Kennedy (@SenJohnKennedy) May 19, 2020
If the Public Company Accounting Oversight Board (PCAOB), an American watchdog isn’t able to audit the accounts of a firm for three consecutive years, the company would stand de-listed from the American stock exchanges.
This bill has been specifically brought in to target the Chinese companies which hide their audit numbers. Luckin Coffee, a Chinese company and rip-off of Starbucks had inflated the details of its sales to perform better when its US IPO was released.
Calls are rising in America to also review the controversial Memorandum of Understanding signed by the Obama government with China in 2013 which allowed the Chinese companies to withhold information if their local laws forbid them from sharing it.
The MoU signed by Obama is the reason China has been able to go unchecked in the US market for so long.
The SEBI equivalent in America, the Securities and Exchange Commission (SEC) chief Jay Clayton had warned investors in April against putting money into Chinese companies due to problems with disclosures.
To prevent predatory investments in American companies by the Chinese government during COVID-19, another legislation has been brought in the US senate.
Reported earlier by TFI, The Restricting Predatory Acquisition during COVID-19 Act would expand the scope of the Committee on Foreign Investment in the United States (CFIUS) to review purchases by companies with ties to the Chinese Communist Party during the coronavirus pandemic.
It will prevent companies with ties to the People’s Republic of China from owning more than 51 percent of shares in the critical infrastructure.
Blacklisting of Companies
The U.S Commerce Department on Wednesday blacklisted 33 Chinese firms and institutions for helping China spy on its minority Muslim Uighur population in Xinjiang. It was also alleged that the aforementioned companies had ties to weapons of mass destruction and China’s military.
The blacklisted companies mainly focused on artificial intelligence and facial recognition which they were using to help China in its human rights violations activities.
India and other European countries have also tightened FDI norms
The threat of dubious Chinese companies looms all over the world. countries have been quick to gauge the ominous Chinese motives and have started addressing the chinks in the armor of their legislations.
India has altered its FDI norms saying all the investments will have to go down the government route after alarm bells went ringing when news of the People’s Bank of China acquiring 1.01 percent stake in India’s lending major, the Housing Development Finance Corporation (HDFC) went bust. To further block China, India has also altered its FPI norms.
Many European countries including Italy, Spain, and Germany have tightened their FDI rules in the light of recent events to prevent a hostile takeover of their companies by Chinese firms.
The Grander scheme of things
The blacklisting, delisting, and anti-predatory bills are all part of the grander scheme of things viz. the Trade Wars. With the Hong Kong situation also brewing and China not giving any indication of backing down over the controversial National security bill, The US President has warned that he will escalate the trade wars in Hong Kong by revoking its preferential treatment.
Trump has already been bleeding dry the tech giant Huawei. The tech behemoth backed by CCP had ambitions of becoming the sole 5G provider but with recent string of counter-measures the Republican government has undertaken against it, the company has been forced to say that its survival is at stake.
The US has been stepping up on the gas and China has been caught by its tail. It needs to be seen how long the Chinese can stay put before trying to come with another vile maneuver.