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Chinese Companies Delisting is Pointless, Think Tank Says

Delisting Chinese firms from the U.S. stock exchanges is a pointless drive. This is according to the think tank Peterson Institute for International Economics’ report. And this would neither deny the companies’ access to American capital markets nor damage China’s growth.

For decades now, the U.S.-China relationship is in its worst it has been. And the stock market seemed to be one of the latest fronts where tensions between the two countries are playing out.

Last May, the Senate passed a bill that might ban a lot of Chinese companies from listing shares in the U.S. Then, in the previous month, President Donald Trump urged regulators to look for ways to tighten scrutiny on the firms.

Still, there are some ways that Chinese firms can get money from American investors, including through the private equity market and Hong Kong’s stock market.

In a PIIE report from Nicholas Lardy and Tianlei Huang, the vital point is that the market for capital is worldwide. And delisting Chinese companies in the United States would not deny these companies to U.S. capital.

As of now, there are approximately 230 Chinese firms, totaling $1.8 trillion in market capitalization. All of these are in the Nasdaq and New York Stock Exchange.

Also, it noted that U.S. private equity firms have been buying out those Chinese firms. One of these is Warburg Pincus and General Atlantic, which led to a deal to acquire Chinese tech firm 58.com, and for it to go private.

 

Increasing Number of Firms

Furthermore, the mounting number of U.S.-listed Chinese companies have sought a secondary listing in Hong Kong. This has been the financial and business center in Asia, which is open to international investors. Chinese firms that have launched secondary offerings in Hong Kong include major tech players NetEase, JD.com, and Alibaba.

The report said, “U.S. institutional investors and U.S. residents who want to own shares in these companies will simply buy them in Hong Kong.”

Then, similarly, foreign investors investing in Chinese firms through New York listings can purchase in Hong Kong.

 

Financial Sector

The hurdles in totally cutting Chinese firms off from U.S. investors underscore how interdependent the top two economies have become.

The said integration seems to increase, especially in the financial sector. And this is despite the warning from Trump last month about a complete decoupling from China, which still stays as a policy option.

In addition to that, U.S. financial institutions are boosting their presence in China. From there, authorities are slowly loosening rules on foreign ownership.

Then, some developments could make financial decoupling between the U.S. and China increasingly unlikely to happen.

The PIIE authors dais, “For all the fireworks over tariffs and investment restrictions, China’s integration into global financial markets continues apace.”

Based on the report, the integration generally appears on the metrics to have accelerated during the past year. Also, U.S.-based financial institutions are actively joining in the process. With that, this makes financial decoupling between the United States and China an increasingly possible thing to happen.

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