US SEC Strengthens Listing Review for Chinese Companies... Responding to Chinese Government Crackdown

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The United States has decided to strengthen the review process for the stock listings of Chinese companies. This move by U.S. authorities is analyzed as a response to the recent increase in regulatory pressure by the Chinese government on its IT companies listed on the U.S. stock market, which has led to a sharp decline in their stock prices and increased losses for foreign investors.

On the 30th (local time), the U.S. Securities and Exchange Commission (SEC) announced measures requiring Chinese companies seeking to sell shares in the U.S. to disclose more information regarding potential risks.

In particular, when Chinese companies list shares of paper companies (nominal companies without substantial assets or business activities), they must specify that these are paper companies and that actions by the Chinese government could impact their financial performance.

Gary Gensler, SEC Chairman, said, "I am concerned that ordinary investors may not realize that they hold shares of paper companies rather than companies headquartered and operated in China."

He also emphasized that all Chinese companies listing on the U.S. stock market must disclose the risk of having their approval revoked by Chinese authorities.

Republican Senator Bill Hagerty and Democratic Senator Chris Van Hollen, members of the U.S. Senate Banking Committee, have pressured the SEC to take a tough stance on Chinese companies.

This SEC measure comes amid Chinese authorities imposing restrictions on their companies’ overseas stock listings.

On the 10th of this month, China’s Cyberspace Administration released a revised version of the Internet Security Review Measures, mandating that internet service providers with over one million members must undergo cybersecurity reviews by authorities before listing overseas, making security reviews compulsory.

The threshold of one million members in China applies to nearly all companies considering overseas listings, effectively turning the overseas listing of Chinese tech companies into a permit-based system.

Concerns over Chinese regulatory actions have caused the stock prices of Chinese companies on the U.S. stock market to plummet recently.

Tencent and Alibaba Group have seen their stock prices drop by about 14% just this month, while ride-sharing company Didi Chuxing, which was removed from Chinese app stores earlier this month, has plunged about 37% during the same period.

Additionally, according to Bloomberg on the 27th, Chinese bike-sharing company Hello has withdrawn its plan to list on the New York Stock Exchange.

This content was produced with the assistance of AI translation services.