US Lawmakers Call for Delisting of Chinese Companies Amid Security Concerns
In a bold move emphasizing national security, the chairs of two key Congressional committees have requested the Securities and Exchange Commission (SEC) to take significant action against several Chinese firms, alleging ties to military operations that threaten American interests. This action underscores an increasing scrutiny of Chinese corporations listed on US stock exchanges.
Identifying Targeted Entities
Representatives John Moolenaar, chair of the House China Committee, and Senator Rick Scott, chair of the Senate Aging Committee, formally urged SEC Chair Paul Atkins to delist 25 Chinese companies, including major players like Alibaba, Baidu, JD.com, and Weibo. They contend that these corporations utilize American investor funds to support the strategic aims of the Chinese Communist Party (CCP), which they claim includes military modernization and severe human rights violations.
Concerns Over Military Ties
The legislators highlighted the risk posed to US investors by these enterprises, asserting that despite their commercial façades, they remain integrated within the framework of the Chinese military due to China’s military-civil fusion policies. This program mandates corporations to collaborate with the People’s Liberation Army when directed by the state.
Efforts to Counteract Influence
This letter to the SEC is part of a broader strategy by the US government to mitigate China’s access to American capital and technology, particularly in the light of ongoing trade tensions between the two countries. Recent measures, including recruitment initiatives by the CIA aimed at gathering intelligence within China, further illustrate the escalating confrontation.
Legal Justifications for Delisting
Moolenaar and Scott cited the Holding Foreign Companies Accountable Act, claiming it empowers the SEC to suspend trading or revoke the registration of foreign firms that fail to safeguard American investments adequately. They emphasized that the opaque nature of many of these Chinese firms renders traditional investor protections ineffective.
Specific Companies Under Scrutiny
- Pony AI – Specializes in autonomous driving technology
- Hesai – Known for laser sensors, linked to military suspicions
- Tencent Music – A streaming platform already noted by the Pentagon
- Daqo New Energy Corp – Previously blacklisted for alleged forced labor practices
Regulatory Environment
As of March, there were 286 Chinese companies listed on US exchanges, according to data from the US-China Economic and Security Review Commission, which monitors economic relations and their security implications. The increasing fears surrounding investments in these companies reflect a broader worry about a potential capital war amidst heightened US-China tensions.
Statements from Officials
Roger Robinson, a former chair of the US-China Economic and Security Review Commission, remarked that continued American capital investment in these companies is gradually dwindling, comparing it to a loss of tolerance for China’s unfair trade practices.
Future Actions and Responses
Atkins, having recently assumed his role as SEC chair, has yet to announce any new policies addressing China but has previously indicated the importance of stringent accounting and auditing practices for investor safety. The House China Committee is also scrutinizing American financial entities involved with Chinese companies alleged to have military links.
In response to these allegations, the Chinese embassy in Washington criticized the US for misusing its national security concerns to impose restrictions on Chinese firms, reinforcing Beijing’s claim against what it deems unreasonable political measures.
The SEC has yet to provide a public comment on this matter.