By Patricia Zengerle and Alun John
WASHINGTON / HONG KONG (Reuters) – The US House of Representatives is expected to pass laws this week that could prevent some Chinese companies from listing their shares on US stock exchanges unless they comply with US auditing standards.
The bill would give Chinese companies like Alibaba (NYSE:BABA), the technology company Pinduoduo Inc. and the oil giant PetroChina Co Ltd. three years to comply with US regulations before being removed from US markets.
A closer examination could also prevent other Chinese companies from being listed in the US, say industry participants. Such listings reached a six-year high this year.
The House is expected to vote on Wednesday evening on the Holding Foreign Companies Accountable Act, which prohibits the listing of securities of foreign companies on a US stock exchange if they have failed the US Public Accounting Oversight Board’s audits for three years on a series.
Aiders said there is bipartisan support for the measure. Measures that tighten Chinese business and trade practices generally pass Congress at large profit margins.
Chinese Foreign Ministry spokeswoman Hua Chunying described it as a discriminatory policy that politically suppresses Chinese companies.
“Instead of putting up layers of barriers, we hope the US can provide a fair and non-discriminatory environment for foreign companies to invest and operate in the US,” said Hua at a press conference.
The Chinese authorities have long been reluctant to allow foreign regulators to inspect local accounting firms, citing national security concerns.
Officials from the Chinese Securities and Exchange Commission said earlier this year that they would be willing to allow examination papers to be inspected under certain circumstances, but previous dispute settlement arrangements have not worked in practice.
The bill, sponsored by Republican Senator John Kennedy and Democratic Senator Chris Van Hollen, was passed unanimously by the Senate in May for US President Donald Trump to veto or sign a law.
Trump is expected to sign the bill if it is approved, according to someone familiar with the matter.
The measure would also require public companies to indicate whether they are owned or controlled by a foreign government.
Shaun Wu, a Hong Kong-based partner with Paul Hastings law firm, said heightened enforcement against Chinese companies is likely, although Democrat Joe Biden will become president in January.
He said that if the bill becomes law, “all US-listed Chinese companies will face increased scrutiny by US authorities and will inevitably consider all available options.”
This could include listing in Hong Kong or elsewhere, he said. Several US-listed Chinese companies, including Alibaba and KFC China operator Yum China, recently launched secondary listings in Hong Kong.