The Holding Foreign Companies Accountable Act, a bill which was passed by the US Senate in May and aims to force certain Chinese firms to delist from American stock exchanges should be welcomed if it is signed into law, according to the founder and chief executive of an exchange-traded fund.
Kevin Carter, CEO of the EMQQ – The Emerging Market Internet & Ecommerce UCITS ETF, said publicly-listed Chinese companies that do not adhere to US accounting rules or disclose their ownership or control, “especially by the Chinese government or Communist Party”, risked being delisted and that the chances of such a bill becoming law “are increasing” with impending US elections and growing geopolitical tensions between the two countries.
“However, investors should welcome this as it could flush-out several ‘bad-actors’ in the space and help validate the rest”, Carter said.
Around 156 Chinese companies with listings in the US are currently under review, 11 of which are state-owned, and carry a total market cap of around US$1.2 trillion. Under the new law, foreign firms listed on American exchanges will need to prove that they are not owned or controlled by a foreign government.
Concerns over the Chinese state's control and influence on large corporations have been brought to prominence in recent months amid concerns the country’s ruling Communist Party is using the country’s economic influence to advance its geopolitical agenda and interfere in the internal operation fo firms.
More recently, US President Donald Trump orders all American firms to stop doing business with video sharing app TikTok, which is owned by one of China’s largest tech companies, ByteDance.
The company is apparently in discussions with Microsoft Corp (NASDAQ:MSFT) with a view to selling its US operations, however, Trump has said any deal must be reached by September 15.
Trump has also issued a similar order against social media and messaging app WeChat, owned by fellow Chinese tech giant Tencent.
Meanwhile, an effort by the UK government to encourage TikTok to relocate its headquarters to the UK from China have hit a possible snag with a number of Conservative ministers, led by trade secretary Liz Truss, saying the UK should not allow the firm to set up shop in London due to national security concerns.