Photo taken on Nov. 4, 2020 shows the New York Stock Exchange in New York, United States. Photo: Xinhua
Five Chinese state-owned giants separately announced plans on Friday to delist their American depositary shares (ADS) from the New York Stock Exchange (NYSE), drawing widespread attention amid escalating tensions between the China and the United States and the ongoing US crackdown on Chinese companies, including a push. potentially eliminating hundreds of Chinese companies in what many call “financial decoupling.”
Shortly after the announcements appeared on trading screens minutes apart, China’s top securities regulator, the China Securities Regulatory Commission (CSRC), issued a statement, stressing that the companies’ decisions were taken on the basis of their own commercial considerations and that they will maintain communication. with the relevant foreign regulatory agencies to jointly protect the legitimate rights and interests of companies and investors.
Chinese and US regulators have been in talks over auditing rules covering US-listed Chinese companies.
Given the relatively small size of the ADS issues, the delistings will have a limited impact on the companies’ operations, officials and experts said. However, the wave of announcements, which come as a growing number of Chinese companies are delisting from U.S. markets, showed worsening conditions in U.S. markets due to relentless crackdowns by the US government against Chinese companies, analysts noted on Friday.
A trader works at the New York Stock Exchange (NYSE) in New York, the United States, June 9, 2022. Photo: Xinhua
Wave of suppression plans
According to a statement from Chinese energy giant PetroChina Co Ltd issued on Friday, the company notified the NYSE during the day that it will apply for the voluntary withdrawal of its ADSs. The company said it intends to file a form with the US Securities and Exchange Commission (SEC) around August 29 and complete the delisting within 10 days after that.
The company gave several reasons for the decision in the statement, including the fact that it faces a “considerable administrative burden” to carry out the disclosure obligations to maintain the listing of ADSs in the US.
Four other Chinese companies made similar statements on Friday: China Life Insurance Co, China Petroleum & Chemical Corp, Aluminum Corp of China and Sinopec Shanghai Petrochemical Co.
The US government has steadily stepped up its crackdown on a wide range of Chinese companies, including a push to delist US-listed companies by changing auditing rules.
Before Friday’s announcements, more than 20 US-listed Chinese companies had sought listings in mainland China or Hong Kong through primary, secondary or dual primary listings. The number is likely to grow in the coming months, as the SEC had put 159 Chinese public limited companies on its watch list by the end of July.
The CSRC statement says it supports companies’ decisions based on their own situation and in accordance with the regulations of the foreign destinations where they are listed.
It also noted that since the ADS issuances of these companies represent a small percentage of their overall shares, the delisting plan would not affect the movements of these companies to use domestic and foreign capital markets to to fundraising.
PetroChina also said in its statement that its issued and outstanding ADSs represented approximately 3.93 percent of the total H shares and approximately 0.45 percent of the company’s total share capital as of Aug. 9 .
Song Guoyou, deputy director of Fudan University’s Center for American Studies, said the overall impact on Chinese companies would be limited as they had not encountered business setbacks or sudden political shocks. Instead, the entire context is clear, as bilateral audit negotiations between the two sides persisted for years, he said.
The layoffs announced the same day, on the other hand, could be a blow to the influence of the US financial sector around the world, experts said.
China USA Photo: VCG
North American market in decline
“As the U.S. chooses to reject rather than attract more qualified global companies to its markets, its market size will shrink, which runs counter to its desire to maintain its first position among markets of world capital,” Li Daxiao, Shenzhen’s chief economist. Yingda Securities, told the Global Times on Friday.
Gao Lingyun, an expert at the Chinese Academy of Social Sciences (CASS) in Beijing, said that in the eyes of global investors, the US is no longer a purely market-oriented financial market, noting that not only Chinese companies but other foreigners. Companies may consider this if considering listing in the US.
In addition, many investors in the US and internationally will lose a valid avenue to invest in high-potential Chinese companies, Gao said.
In what analysts call a politically charged move, the US has taken gradual steps to step up requirements for Chinese listed companies to disclose information. For example, in mid-2021, the SEC announced it would not allow Chinese companies to raise money in the US unless they fully explained their legal structures and disclosed the risk of the Chinese government interfering with their business, a Reuters report noted. . .
Xi Junyang, a professor at Shanghai University of Finance and Economics, told the Global Times that it is almost certain that Chinese companies listed in the US will pull back to avoid risks as the US market environment continues to deteriorate- yes
“On a smaller scale, the SEC is putting up more and more obstacles such as auditing rules or information disclosure for Chinese companies. In a broader sense, the relationship between the two countries has become increasingly uncertain and listed companies are very likely to experience unfair treatment in the US amid these political tensions,” Li said.
Gao predicted that more Chinese companies could follow suit and delist from US markets, particularly if they are large state-owned enterprises.
“Instead of exposing itself to ever-increasing political risks in the US, it may be a better option to delist from the US and reorganize its funding approaches, such as going public in Hong Kong, as many have suggest,” Gao said.
Aside from the “financial decoupling” effort, the U.S. has taken a series of provocative actions against China in recent days in a number of ways, including signing into law a chip subsidy bill that aims to cripple the industry of chips from China.
Experts noted that if the US government continues to push for a “financial decoupling” between China and the US, it would lead to huge losses for both markets. There are about 250 Chinese companies listed in the US, either directly or through ADSs.
Analysts called on the two countries to strengthen communication to address the audit dispute. The United States, in particular, should meet China halfway to reach a consensus on the regulatory issue, they added.
“U.S. regulators should think long-term, rather than take a myopic approach to China,” Li said.