In Trade Talks, Senators Want More Scrutiny of Chinese Firms
In Trade Talks, Senators Want More Scrutiny of Chinese Companies
(Bloomberg) -- Two senators want the Trump administration to push for another concession in its trade negotiations with China: better protections for U.S. investors who buy shares of Chinese companies that are listed on American exchanges.
Senators Chris Van Hollen of Maryland and John Kennedy of Louisiana are urging Trade Representative Robert Lighthizer to demand that China allow U.S. regulators to scrutinize the audits of Chinese companies that trade in America. Critics have argued that watchdogs’ inability to examine such audits puts American investors at risk of buying the shares of companies that might be manipulating their financial statements.
“The current failure of China to comply with our laws and play by the same rules as everyone else puts American investors and the credibility of our markets at risk,” Van Hollen, a Democrat, and Kennedy, a Republican, wrote in a letter to Lighthizer dated Wednesday.
The lawmakers want the Trump administration to bar Chinese companies from trading on American exchanges if they won’t turn their audits over to the Public Company Accounting Oversight Board, a U.S. regulator. The request dovetails with a bill the two senators proposed in March. Senator Marco Rubio, a Florida Republican, has pushed for similar legislation.
‘Fraudulent Activities’
The 159 Chinese companies listed on major U.S. exchanges had a combined market value of $1.1 trillion as of last year, up dramatically from $100 billion in 2012, the U.S.-China Economic and Security Review Commission said in its annual report to Congress. The commission, which was set up in 2000 to monitor and investigate potential national security threats, said such companies pose challenges for U.S. regulators and investors.
The lack of PCAOB inspections “leaves U.S. investors exposed to potentially exploitative and fraudulent activities by Chinese firms listed in the United States,” the panel wrote in its report, which was submitted to lawmakers in November.
For years, Chinese accounting firms have resisted U.S. regulators’ demands for information about their audits of U.S.-listed firms, which include giants like Alibaba Group Holding Ltd.. The Chinese auditors argue that disclosing the records would violate laws that prohibit the transfer of data that might contain state secrets to foreign entities.
President Donald Trump’s trade war with China has drawn criticism from some economists who say it will stunt growth. But Trump has vigorously defended his actions, arguing the U.S.’s biggest economic rival has flourished during nearly two decades as a member of the World Trade Organization without opening its economy to foreign investment or playing by WTO rules on market access.
To contact the reporter on this story: Austin Weinstein in Washington at aweinstein18@bloomberg.net
To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Gregory Mott
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