Topline
In an apparently coordinated action, at least four major state-owned Chinese companies said Friday they intend to delist their stocks in the U.S., as Beijing appears unwilling to bend to increased U.S. scrutiny into the country’s financial auditing practices.
A man fills his car at a PetroChina gas station in Guangzhou, China.
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Key Facts
Aluminum Corp. of China, China Life Insurance, PetroChina and Sinopec all announced they plan to delist from U.S. stock exchanges within the next month.
The quartet are among the largest companies in China and in the world: According to Forbes’ list of the 2,000 largest public companies globally released in May, PetroChina is the 21st largest company in the world, Sinopec the 45th, China Life Insurance the 71st and Aluminum Corp. of China the 853rd.
All will remain listed on the Hong Kong and Chinese exchanges.
Chinese financial regulators said Friday the delistings are routine and talks with foreign regulators are ongoing, though Redmond Wong, a strategist at Saxo Markets told Bloomberg the move is likely because China “may be hesitant to give access” to the U.S. to potentially sensitive company and government data.
Key Background
The Holding Foreign Companies Accountable Act, signed into law by former President Donald Trump in December 2020, required foreign securities listed in the U.S. to disclose any government involvement and allow the U.S. to review their financial auditing practices, specifically targeting Chinese companies. All four of the companies who announced their delisting intentions Friday were included in a list of violators of the act by the Securities and Exchange Commission in March. Tensions between China and the U.S. this month, as a trip to Taiwan by House Speaker Nancy Pelosi (D-Calif.) caused Beijing to threaten military retaliation.
Big Number
$1.3 trillion. That was the market capitalizations of the 261 Chinese companies listed in the U.S. as of March 31, 2022, according to the U.S.-China Economic and Security Review Commission.
What To Watch For
If other Chinese companies also delist in the U.S. Shares of Alibaba Group, which has by far the largest U.S. market capitalization of any Chinese company, slid 3.2% on the New York Stock Exchange in early Friday trading.
Further Reading
Alibaba Leads Slide in US-Listed China Stocks on NYSE Exit Woes (Bloomberg)
What’s Driving US-China Spat Over Audits, Delistings (Bloomberg)
A $1.3 trillion question: The fate of 261 Chinese stocks listed in the U.S. hinges on one key point (Fortune)
