Chinese companies are leaving the New York Stock Exchange
According to experts, the protracted conflict between the U.S. securities market regulator and Chinese companies that trade their shares on exchanges in the United States will lead to the fact that five large state-owned Chinese companies will soon leave the New York Stock Exchange (NYSE), and the number of such companies may increase in the future.
Last week, Chinese companies Sinopec, China Life Insurance Company, Aluminium Corporation of China Limited, PetroChina and Sinopec Shanghai Petrochemical announced their voluntary delisting from the NYSE.
Investors who previously purchased shares in the five companies will exchange their depositary receipts traded in the United States for shares of the same firms whose shares are traded on the exchange in Hong Kong. However, it is not yet clear what the exit means for investors holding shares in the hundreds of Chinese firms still listed on U.S. exchanges.
With the departure of the five companies, only China Eastern Airlines and China Southern Airlines will remain major Chinese state-owned firms whose shares are listed on the U.S. stock market.
Some other major Chinese companies have either already delisted in the U.S. or plan to do so. Didi, a Beijing-based cab ordering company, was delisted under pressure from the Chinese government earlier this year. Fast-food chain Yum China Holdings announced this week that it is converting its current secondary stock listings in Hong Kong to a primary listing, making it easier to delist. Last month, e-commerce giant Alibaba took the same step.
In a recent interview with CNBC, former NYSE President Tom Farley said that from an economic perspective, the departure of the five Chinese state-owned companies is “not an event.” According to him, these companies do not trade extensively in the United States.
However, Farley added that the move is very important because it opens the door for private large Chinese concerns, including Alibaba and JD.com, to leave the U.S. stock market.
Last December, the Securities and Exchange Commission (SEC) finalized new rules that allowed the agency to prohibit trading in shares of Chinese firms that do not meet the regulator’s requirements.
The new rules were written to implement the Foreign Corporate Accountability Act of 2020, which was passed by Congress with the express intent of forcing Chinese firms whose shares trade on the U.S. stock market to prove that they are not controlled by the Chinese government and forcing them to comply with rules requiring transparency in business conduct.
As of Aug. 7, the SEC had placed 162 Chinese firms on a list of companies facing a stock trading ban for failing to comply with the law.
The U.S. listing ban will only go into effect after a company is found to be in violation of reporting requirements for three consecutive years beginning in 2023.