The U.S. Securities and Exchange Commission announced on Dec. 2, that companies listed in the United States must prove whether they were owned and controlled by government entities and provide evidence for an audit inspection.
Bloomberg said the final plan of the “Foreign Corporate Liability Act” requires foreign companies to disclose their accounts to the U.S. government, or else they will be banned by the New York Stock Exchange and Nasdaq for three years.
This new U.S. regulation does not specify which countries. However, in reality, among foreign companies listed in the United States, only two regions are not allowed to check their accounts: one is China, and the other is Hong Kong. Hong Kong is already under the control of the CCP, so this U.S. regulation is really aimed at Chinese companies.
In fact, for Didi itself, the U.S. requirements are not excessive and should be complied with. But the Chinese government can’t stand it because Beijing is increasing its control over Didi and private technology companies.
The Financial Times notes that what forced Didi to pull out of the U.S. stock market “wasn’t American politicians, nor the market, but the highest authority of the Chinese Communist Party (CCP). Xi Jinping is the ultimate arbiter of the whereabouts of Chinese companies.”
The U.S. introduced this new rule to ensure that all foreign companies listed in the U.S. comply with U.S. rules. Because without supervision, investors might face enormous risks.
However, the CCP authorities are reluctant to allow foreign regulators to inspect Chinese companies. Since Didi holds many users, maps, and traffic data in China, the CCP worries that there will be a threat if the U.S. censors related information about Didi.
On this point alone, there is no room for reconciliation between the United States and China, not to mention one more condition that Chinese Communist Party officials cannot accept. New US rules require foreign companies listed in the U.S. to list the names of any CCP members on their boards of directors.
This is another point that directly affects the CCP. This is because many CCP members are involved in managing businesses in mainland China, whether they are private enterprises or state-owned enterprises. Especially in the management of some large enterprises, many of whom are family members of CCP officials.
If the United States knew the names of CCP members in business management, it would greatly frighten CCP members,who are high officials. Because under current US-China relations, the U.S. has imposed sanctions on some high-ranking CCP officials and their families. If the family members of the company’s officials also fall into the hands of the U.S., it is feared that in the future they may also be sanctioned by the U.S. Therefore, CCP officials cannot accept this, especially those with influence and power.
Why does the Beijing government allow Chinese companies to be listed in Hong Kong? Precisely because the Hong Kong stock market does not have these two problems. It can eliminate the various risks that the CCP is worried about.
Therefore, Didi’s main factor in withdrawing from the U.S. stock market was political issues. There is not only the element of data security but also the information element of CCP officials. At the same time, it also reflects the US-China competition factor
Andrew Collier, managing director of Orient Capital Research in Hong Kong, told the Financial Times that new U.S. regulations and the concerns of the Chinese Communist Party have “inserted the final nail in the coffin… of the Chinese and US stock markets.”
It won’t take long for us to see a more chaotic wave of Chinese companies exit. More than 200 Chinese companies listed in the U.S. have voluntarily left the U.S. stock market and others may face expulsion from U.S. exchanges.