After the US "Foreign Company Accountability Act" is implemented, where will China concept stocks go after the crash?

(Financial World) The US "Foreign Company Accountability Act" is implemented, where will China concept stocks go after the crash?

　　China News Service, Beijing, March 25 (Reporter Xia Bin) On the 25th Beijing time, the US Securities and Exchange Commission issued the latest announcement stating that it has passed temporary final amendments to implement the "Foreign Company Accountability Act" authorized by the American Council (below) Called the "act") requirements for information disclosure of listed companies.

　　Although the bill applies to all foreign companies listed in the United States, there are a number of clauses that clearly target Chinese companies listed in the United States and Chinese concept stocks that have already been listed in the United States.

Affected by this news, China Concept Stocks suffered heavy losses in the US capital market.

　　By the end of the day, Tencent Music had fallen by more than 27%, Vipshop would have fallen by more than 21%, iQiyi had fallen by nearly 20%, Xiaopeng Motor had fallen by more than 15%, Ideal Car had fallen by more than 13%, and Xunlei had fallen by more than 12%...Wind Data show that more than 40 Chinese concept stocks fell more than 10%.

　　What exactly does the bill provide?

For example, if a foreign issuer fails to meet the requirements of the U.S. Public Company Accounting Supervision Commission for the inspection of accounting firms for three consecutive years, its securities are prohibited from trading in the United States.

　　For another example, if a listed company employs an accounting company that is not regulated by the United States, and the U.S. review agency is unable to audit its financial reports, the company is required to prove that it is not owned or controlled by the government of the country where it is located.

　　Liu Feng, chief economist of China Galaxy Securities, said that the bill requires companies in mainland China or Hong Kong to prove that they are not controlled by foreign governments and provide audit work papers for review. To a certain extent, domestic companies are not allowed to provide financial audits overseas. The manuscript and foreign institutions may not directly investigate and collect evidence in China for conflicts.

　　Liu Feng also pointed out that Nasdaq has further tightened its listing rules and imposed higher requirements on restricted markets including China, making it more difficult for Chinese concept stocks to list in the United States.

If the external environment deteriorates further, it is not ruled out that the US government will consider applying pressure to restrict US investors’ investment in Chinese companies.

　　The person in charge of the relevant department of the China Securities Regulatory Commission has previously stated that from the content of the bill, the additional disclosure requirements of the bill on foreign issuers include proving that they are not owned or controlled by foreign governments, and disclosing the names of Communist Party officials on the board of directors and whether the Communist Party constitution is It is obviously discriminatory to be written into the company's articles of association, and it is not based on professional considerations of securities supervision. This practice of politicizing securities supervision is firmly opposed.

　　"We have been seeking to strengthen cooperation with relevant U.S. regulatory agencies and have repeatedly proposed solutions, but have never received a comprehensive and positive response." China Securities Regulatory Commission Chairman Yi Huiman said recently when discussing the proper handling of China's concept stock issues. We firmly believe that cooperation is a win-win option. If we want to solve the problem, we must sit down. Disagreements can only be resolved through negotiation. There is no other way.

　　Where is the future of China Concept Stocks?

Undoubtedly, the bill makes the living environment of Chinese concept stocks in the United States worse, and companies that originally planned to go public in the United States may also change their minds.

　　Dong Dengxin, director of the Institute of Financial Securities at Wuhan University of Science and Technology, told a reporter from China News Agency that the suppression of China's concept stocks by the US securities regulators may push more China's concept stocks to delist in the United States and return to the Hong Kong or A-share market.

　　In an interview with a reporter from China News Agency, Wang Wei, deputy chief executive of ICBC International Holdings Co., Ltd., said that the wave of Chinese concept stocks returning to Hong Kong is expected to last at least a few years.

One of the major reasons is that from the overall trend of the U.S. market, China Concept Stocks are facing an increasingly complex regulatory environment. The performance and financing capacity of the capital market will be affected by more and more non-corporate operating conditions, which will affect investment. People's confidence in China Concept Stocks.

　　In fact, China's concept stocks have already set off a "return to Hong Kong".

Since the US Senate voted to pass the bill in May 2020, more than 10 Chinese concept stocks such as NetEase, JD.com, China Lodging Hotels, GDS, and Baidu have successfully listed in Hong Kong for the second time.

　　Zhang Ming, deputy director of the Institute of Finance of the Chinese Academy of Social Sciences, reminded that the U.S. government has been demanding that some Chinese concept stocks be delisted from the U.S. stock market for some time, especially Chinese state-owned enterprises.

"If the U.S. government continues to rigorously review and create difficulties for China's concept stocks in the future, how we should respond requires systematic thinking." (End)