The bill requires companies to certify that they are not owned or controlled by a foreign government, and it allows the Securities and Exchange Commission to delist companies that don’t comply. The companies would also need to comply with US auditing regulations. That’s something Chinese firms and regulatory authorities have long resisted.
The bipartisan bill passed the Senate quickly with a unanimous vote on May 20. It’s expected to have an easy ride through the House of Representatives, reflecting a growing mistrust of Beijing in Washington.
But lawmakers' enthusiasm for the bill isn't shared on Wall Street. Financial analysts have been warning that if US exchanges tighten regulations, Chinese firms will only try moving to London, Frankfurt, or Hong Kong, which could ultimately hurt American investors. More than 150 Chinese firms are currently listed on exchanges in the United States, including big names such as IT giant Alibaba Group. Chinese search engine Baidu is already reportedly considering delisting from Nasdaq.
The Trump administration is using additional means to turn up the pressure on China. The federal pension fund said it will no longer invest in Chinese stocks. Officials have also taken aim at tech giant Huawei, with the US Commerce Department announcing that foreign manufacturers who use American technology are barred from selling microchips to the Chinese firm.
The rising tensions are having an impact on other countries, including Japan. Many Japanese electronics companies have deals with Huawei.
Experts worry that a tide of anti-China sentiment will eventually develop into a wave of anti-globalism. Nationalistic policies could disrupt financial stability, giving a devastating blow to a global economy already suffering from the impacts of the coronavirus pandemic.