CNBC's Eunice Yoon reports how U.S. companies have been dealing with the geopolitical tensions between the U.S. and China. For access to live and exclusive video from CNBC subscribe to CNBC PRO: [ Ссылка ]
A new Securities and Exchange Commission rule that will require foreign companies to submit documentation about government affiliations and government influence is causing headaches for China investors. It’s one of several snags that is popping up between U.S. and China investors.
China stocks have been in correction mode for several weeks, but the new rule is exacerbating the rout, particularly those with listings in the U.S.
U.S.-listed China stocks this week:
GSX down 57%
Tencent Music down 36%
Vipshop down 34%
Baidu down 22%
Bilibili down 12%
Trip.com down 11%
Alibaba down 6%
While the new SEC rules apply to all foreign-listed companies, they are specifically aimed at China, which has repeatedly run afoul of efforts by U.S. regulators to monitor the audits of Chinese companies.
This week, the SEC adopted interim final amendments to implement the Holding Foreign Companies Accountable Act. Under the new rules, companies will be required to submit documents to establish that they are not owned or controlled by a governmental entity in a foreign jurisdiction.
Chinese companies will also have to name each board member who is a Chinese Communist Party official.
If the companies fail to comply after three years, U.S. regulators could delist the companies.
Jay Clayton, who headed the SEC for the past four years and recently returned to private practice, said the SEC’s move this week to begin implementation of the new law may have woken up the trading community.
“Congress has now decided that Chinese companies listed in the U.S. should not continue to have an effective exemption,” Clayton wrote to me. “The audits from these companies must come into compliance” with U.S. law.
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