The Senate passed a bill by unanimous consent on Wednesday to take on Chinese companies listed on U.S. exchanges.
The legislation would require the companies to submit to a range of stringent provisions to avoid being booted.
First, they must disclose whether they are owned or controlled by a foreign government. Second, and perhaps most intrusively, they would have to comply with audits from the Public Company Accounting Oversight Board (PCAOB) for three years in a row.
“We just want Chinese companies to play by the same rules as everybody else,” said Sen. Chris Van Hollen (D-MD) during an appearance on Yahoo Finance shortly after the bill passed (video above). “This is an important step forward for transparency,” he said.
Van Hollen has led the effort, known as the Holding Foreign Companies Accountable Act, along with Sen. John Kennedy (R-LA). A mix of other senators like Kevin Cramer of North Dakota, Bob Menendez of New Jersey and Marco Rubio of Florida are co-sponsors.
Currently, companies registered in China and Hong Kong are not subject to PCAOB audits.
A group known as the U.S.-China Economic and Security Review Commission has compiled a list of 156 Chinese companies that are currently listed on the biggest three U.S. stock exchanges. The list includes giants like Alibaba (BABA), Baidu (BIDU) and JD.com (JD).
Van Hollen says the legislation is “designed to protect investors” because the lack of transparency among Chinese companies “exposes American investors to unnecessary risks.”
“It’s asinine that we’re giving Chinese companies the opportunity to exploit hardworking Americans” added Senator Kennedy in a statement.
Washington itching to take on China
The bill’s fate is uncertain as it still needs to pass the House of Representatives and be signed into law by Trump, but it comes at a time when Washington appears more primed to take on China and Chinese institutions in the wake of their perceived mishandling of the coronavirus.
GOP lawmakers, including Senators Josh Hawley and Tom Cotton, have proposed a range of punishments for the country. From having China “pay back all nations impacted” to forgiving U.S. debt to sanctioning Chinese officials.
Washington officials are also in a tense standoff with Chinese telecommunications giant Huawei, including recent Commerce Department efforts to expand sanctions against the company.
White House economic adviser Larry Kudlow recently expressed support for some of the ideas in Kennedy and Van Hollen’s bill. In an interview Tuesday on Fox, the White House economic adviser pushed for more accountability from Chinese companies listed in U.S. markets. “We have to,” he said, “for investor protection and we have to for national security.”
Some Chinese companies “are operating against our own interests,” Kudlow said.
President Trump has also signaled a rethinking of U.S.-China relations overall. This week he even called into question the trade deal enacted with much fanfare in January, saying, “I feel differently now about that deal than I did three months ago,” adding “and we’ll see what all happens.”
Ben Werschkul is a producer for Yahoo Finance in Washington, DC.
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