Chinese Companies Must Play By American Rules Or Be Banned From U.S. Exchanges, Senate Rules

TOPLINE

The Senate, by unanimous consent on Wednesday, passed legislation that would ban many Chinese companies from listing shares on U.S. stock exchanges or raising money from American investors, as tensions between the world’s two largest economies continue to flare up.

KEY FACTS

Crucial quote

“I do not want to get into a new Cold War,” Kennedy said in the Senate on Wednesday. “All I want, and I think all the rest of us want, is for China to play by the rules.”

Key background

The bill’s passage without any objection reflects the growing frustration with China among U.S. lawmakers. Both President Trump and Secretary of State Mike Pompeo have recently pushed a controversial theory that the coronavirus originated in a lab in Wuhan, China, though there is no evidence supporting this claim. Just last week, Republican Senators introduced the “COVID-19 Accountability Act,” which would authorize Trump to impose sanctions on China if it does not cooperate with an investigation into the origins of the pandemic. That same day, the Labor Department directed a $557 billion federal pension fund to halt all investments in Chinese stocks because it “pose[s] a threat to national security” (since China won’t allow U.S. regulators access to audit reports).

There has also been a renewed focus on the trade war with the phase one deal that was signed in 2019 now at risk. Trump’s administration has threatened to void the deal if China doesn’t uphold purchasing commitments. “If they don’t buy, we’ll terminate the deal. Very simple,” the president recently said on Fox News.

What to watch for

“As the virus risk is abating globally, political/geopolitical fallout is emerging as a new and significant risk,” Marko Kolanovich, J.P. Morgan’s global head of macro quantitative and derivatives research, told CNBC. “For example, just today the U.S. senate passed a bill to bar Chinese companies from being listed on U.S. exchanges.”

Tangent

U.S. shares of Chinese e-commerce giant Alibaba
BABA
fell by more than 2% on the news, before paring back losses somewhat.

Further reading

Stocks Rally, Dow Gains 300 Points Despite Trump’s Latest China Threats (Forbes) 

How Coronavirus Could Derail The U.S.-China Trade Deal (Forbes) 

Can Trump Kick China Companies Off The NYSE, Nasdaq? (Forbes)

Stocks Hit Record Highs As U.S. Signs Phase One Trade Deal With China (Forbes) 

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