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The House of Representatives on Wednesday passed a bill that would prevent companies that refuse to open their books to U.S. accounting regulators from trading on U.S. exchanges. The bill gained unanimous support in the Senate earlier this year, meaning it only needs President Donald Trump’s signature to become law.
The bill would apply to any foreign company, but the focus on China is obvious. Beijing has withstood such scrutiny. It requires companies traded abroad to keep their audit documents in mainland China, where they cannot be reviewed by foreign agencies. All public companies listed in the United States would also be required to disclose whether they are owned or controlled by a foreign government, including the Chinese Communist Party.
“The enactment of any of these laws or other efforts to increase U.S. regulatory access to audit information could create uncertainty for investors for affected issuers, including us, of the market price of our [US shares] could be adversely affected, and we could be delisted if we are unable to meet requirements on time, JD said in filings with the US Securities and Exchange Commission.
Beijing has expressed its dissatisfaction with the American legislation. Asked about the House vote on Wednesday, Foreign Ministry spokesman Hua Chunying said, “We strongly oppose the politicization of securities regulation.”
“We hope that the US side can provide a fair, just and non-discriminatory environment for foreign companies to invest and operate in the United States, instead of trying to put up various barriers,” Hua told reporters.
If the bill becomes law, its immediate consequences are not entirely clear. Goldman Sachs analysts pointed out in a research note earlier this year that the law would only require companies to deregister if they could not be audited for three consecutive years.
Still, even the potential for stricter regulatory scrutiny was likely to push more companies towards a double listing in Hong Kong, analysts added.
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