Delisting
Five large Chinese companies have indicated that they would begin delisting procedures to remove their shares from the New York Stock Exchange, tacitly over disputes with the SEC over audit information that has been ongoing. While the China Securities Regulatory Commission has stated that the choice to delist was based on each company’s own business decisions, they have all complied with the rules and regulatory requirements in US capital markets, although the agency also indicated that it was keeping channels open with ‘relevant overseas regulatory agencies”, indicating that there is some ongoing dialog. Given the increased tension between the US and China in recent weeks, the timing does seem a bit pointed.
The companies involved, Sinopec (600028.CH), China Life (601628.CH), Chalco (601600.CH), PetroChina (601857.CH), and Sinopec Shanghai Petrochemical (600688.CH) will begin the ADR delisting process this month with some maintaining Hong Kong and Chinese exchange listing. As we have previously noted China Mobile (941.HK), China Unicom (762.HK), and China Telecom (728.HK) were delisted last year based on a previous administration’s administrative order “Addressing the Threat from Securities Investments That Finance Communist Chinese Military Companies” that was left intact by the Biden administration, which was separate from the audit conflict that is the root of the current delistings.
Pundits are split on whether this would help or hurt the prospects for a deal that might satisfy the US audit rules, but it seems that the current environment is not one under which China is going to be making many concessions, especially if it means opening up books that might reveal connections that could spur further anti-China sentiment as we head into the November elections. So far no Chinese CE companies have been forced to or voluntarily delist, but the HFCAA (The Holding Foreign Companies Accountable Act) , which contains the rules in contention has implications for a number of Chinese CE companies and the new delisting announcements only add to the tension.
The companies involved, Sinopec (600028.CH), China Life (601628.CH), Chalco (601600.CH), PetroChina (601857.CH), and Sinopec Shanghai Petrochemical (600688.CH) will begin the ADR delisting process this month with some maintaining Hong Kong and Chinese exchange listing. As we have previously noted China Mobile (941.HK), China Unicom (762.HK), and China Telecom (728.HK) were delisted last year based on a previous administration’s administrative order “Addressing the Threat from Securities Investments That Finance Communist Chinese Military Companies” that was left intact by the Biden administration, which was separate from the audit conflict that is the root of the current delistings.
Pundits are split on whether this would help or hurt the prospects for a deal that might satisfy the US audit rules, but it seems that the current environment is not one under which China is going to be making many concessions, especially if it means opening up books that might reveal connections that could spur further anti-China sentiment as we head into the November elections. So far no Chinese CE companies have been forced to or voluntarily delist, but the HFCAA (The Holding Foreign Companies Accountable Act) , which contains the rules in contention has implications for a number of Chinese CE companies and the new delisting announcements only add to the tension.
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