US Senate Passes Bill That Could Block Chinese Companies From Stock Exchanges

An investor checks stock prices at a brokerage in Shenyang capital of Liaoning province

"The Holding Foreign Companies Accountable Act" bars securities of any company from being listed on any U.S. securities exchange if it has failed to comply with the U.S. Public Company Accounting Oversight Board's audits for three years in a row.

The legislation passed by the US Senate on Wednesday, which requires companies to certify that they are not owned or controlled by a foreign government, will prompt more US-listed Chinese companies to pursue relistings in the A-share market, experts said on Thursday.

Last week, Trump said in an interview on Fox Business that he's "looking at" Chinese companies that trade on ⁦the NYSE and Nasdaq exchanges but do not follow US accounting rules.

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After reaching a brief detente in their trade war late previous year, the USA and China are once again clashing publicly on several fronts, including Washington's national security concerns about Chinese telecoms company Huawei and Beijing's handling of coronavirus. US stocks came off their highs of the session Wednesday afternoon following the passage of the bill, which comes amid increasing tensions between the USA and China, with representatives from the world's biggest economies fighting over Beijing's handling of the COVID-19 pandemic, which was first identified in Wuhan, China. From a due diligence standpoint, this is good news for the investor with a scrutinizing eye, but it also means that more Chinese companies could be mired in regulatory measures.

The Bill must be passed by the House of Representatives and signed by US President Donald Trump before it becomes law.

"For a good company, there are many destinations for listing, and these are not limited to the US". "We can't let foreign threats to Americans' retirement funds take root in our exchanges". "This legislation protects the interest of hardworking American investors by ensuring that foreign companies traded in America are subject to the same independent audit requirements that apply to American companies", the U.S. government said. The shares of e-commerce major Alibaba fell over 2 per cent. Te development is viewed as part of a wider economic conflict between the USA and China -relations already frayed by the ongoing coronavirus pandemic. China is expected to react sharply to the move. "We just want Chinese companies to play by the rules". He, however, added that a crackdown could probably backfire and hit exchanges in London and Hong Kong. These companies have a combined capitalisation of over $1.8 trillion. "I've asked my committees to take a look at what it is".

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