January 19, 2021

Chinese Companies to Face More Scrutiny as Bill Clears House

China is not that worried if the new legislation takes effect, these people said. The stock markets of Shanghai and Hong Kong are much larger and deeper than they were a generation ago, and valuations for many companies are often higher than in New York. So Chinese companies can raise money at home if the United States makes them unwelcome, they said.

Until recently, China’s stock exchanges did have one important shortcoming: Only profitable companies were allowed to start selling shares. That meant fast-growing but unprofitable companies, especially in the tech industry, often looked to the United States instead.

Two years ago, the Shanghai Stock Exchange created an additional market that does allow unprofitable but fast-growing companies to sell shares and obtain a listing. That market is the Science and Technology Innovation Board, usually known as the STAR market.

The Trump administration has passed a series of measures aimed at severing economic ties between the United States and China, and it shows little sign of letting up in its final months.

Increasingly, those measures have focused on the financial investments that link the world’s two largest economies. Last month, Mr. Trump issued an executive order prohibiting American investment in a list of Chinese companies with ties to the military.

The Securities and Exchange Commission has also proposed regulations that would prohibit Chinese companies from conducting initial public offerings on American stock markets or delist Chinese companies that didn’t comply with American auditing rules. Under pressure from the Trump administration, a federal retirement fund also halted plans this year to invest in Chinese companies.

On Wednesday, Customs and Border Protection also issued another round of restrictions barring imports of goods made with cotton from Xinjiang, the far western region where China has detained as many as a million Uighurs and other ethnic minorities in internment camps and prisons.

Article source: https://www.nytimes.com/2020/12/02/business/economy/chinese-companies-to-face-more-scrutiny-as-bill-clears-house.html

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