In a major move, the US Senate has given a nod to a legislation that may block some of the Chinese firms from getting listed on the American stock exchanges. The bill, introduced by Senator John Kennedy, a Republican from Louisiana, and Chris Van Hollen, a Democrat from Maryland, seeks to delist companies not abiding by the US accounting laws. According to Bloomberg, nearly 800 Chinese firms are likely to delist from American bourses.

It comes as tensions are escalating between the world’s two largest economies on coronavirus and trade related issues. “We can’t let foreign threats to Americas’ retirement funds take root in our exchanges,” Bloomberg reported Kennedy as saying.

According to the bill, the companies would have to certify that they are not under the control of a foreign government. The securities of the company would be barred from the stock exchange if the Public Company Accounting Oversight Board (PCAOB) is not able to audit the firm for three straight years so as to determine that it is not under the foreign government’s control.

Nevertheless, the bill still has to pass the House of Representatives. It also has to be signed by President Donald Trump to become law.

Chinese firms should play by rules

“The Chinese Communist Party cheats, and the Holding Foreign Companies Accountable Act would stop them from cheating on the US stock exchanges. We just want Chinese companies to play by the rules. ” Kennedy tweeted.

“Publicly listed companies should all be held to the same standards, and this bill makes common sense changes to level the playing field and give investors the transparency they need to make informed decisions,” Bloomberg reported Van Hollen as saying. “I’m proud that we were able to pass it today with overwhelming bipartisan support, and I urge our House colleagues to act quickly,” he also said.

Luckin Ciffee issue

Chinese companies listed on the US stock exchanges have recently been under intense scrutiny after the incident involving Luckin Coffee. The Chinese coffee chain recently revealed that an internal probe found hundreds of millions of dollars of its sales in 2019 were fabricated.

Chinese firms in focus

The US administration last week directed the federal retirement savings body to stop investments in Chinese companies. Trump recently told Fox Business that he’s “looking at” Chinese companies that trade on the NYSE and NASDAQ but don’t follow US accounting rules. However, he also said that action on these firms may backfire as these may move to the exchanges in London or Hong Kong. China has for some time now refused to allow the PCAOB to examine audits of firms whose shares trade on the New York Stock Exchange, NASDAQ and other US platforms.

Shares take beating

The shares of Chinese companies plunged on the US stock exchanges after the development. The shares of e-commerce major Alibaba fell over 2 per cent.

Also read: Lockdown 4.0 Coronavirus: SoPs for domestic flights! Aarogya Setu app mandatory; cases-1.12 lakh

Also read: Domestic flights to resume on Monday: What to keep in mind when you go to airport?

Source Article