U.S. Discusses Delisting Chinese Companies from Stock Market...Pressuring Trade Negotiations with China

The U.S. is discussing ways to delist Chinese companies listed on the stock market. This is to gain an advantage in the U.S.-China trade war.

According to the online media Politico on the 15th (local time), Treasury Secretary Scott Besant said in a Fox Business interview on the 9th regarding the possibility of delisting Chinese companies from the U.S. stock market, "I think everything is on the table."

Senator Rick Scott (Republican, Florida) recently raised this issue in a letter to Paul Atkins, nominee for Chairman of the Securities and Exchange Commission (SEC). He stated, "The U.S. capital market provides unparalleled funding opportunities to global companies, envied by the world. However, this privilege comes with responsibilities, the core of which is transparency and compliance with our financial disclosure regulations," adding, "It is concerning that Chinese companies continue to access U.S. capital while refusing to comply with our regulations."

Politico reported that it is unclear how seriously the Trump administration is considering the delisting of Chinese companies from the U.S. stock market. However, the fact that this idea is gaining attention again shows that the U.S. does not want to exclude any means in the trade war with China.

According to the U.S.-China Economic and Security Review Commission (USCC), a bipartisan advisory body of the U.S. Congress, as of March 7, 286 Chinese companies were listed on the U.S. stock market. Their total market capitalization is $1.1 trillion.

There are various ways to pursue the delisting of Chinese companies.

The U.S. Congress enacted the Holding Foreign Companies Accountable Act (HFCAA) in 2020, which requires delisting Chinese companies that do not comply with U.S. accounting standards from the U.S. stock market. This allows for delisting Chinese companies that fail to properly respond to audits by U.S. accounting authorities for two consecutive years, but it is a time-consuming method.

A faster method being discussed is for President Trump to issue an executive order on national security grounds. Another method is to ban the Variable Interest Entity (VIE), a means used by Chinese companies to list on the U.S. stock market. Chinese companies have used this method to circumvent foreign ownership restrictions in their country while raising capital in the U.S.

Regardless of the method used, if the Trump administration pushes for the delisting of Chinese companies, there is a concern that the financial market, already unsettled by tariff policies, may become more volatile.

Reporter Lee Song-ryeol, Hankyung.com yisr0203@hankyung.com