The China Securities Regulatory Commission (CSRC) has entered into talks with its U.S. counterpart after the U.S. Securities and Exchange Commission (SEC) identified five U.S.-listed Chinese companies failing to follow the Holding Foreign Companies Accountable Act (HFCAA). Passed in late 2020, the act aims to prevent Chinese mainland companies from listing on U.S. exchanges if they have not complied with audit requirements from the Public Company Accounting Oversight Board – the organization overseeing the audits of U.S.-based public companies – for three consecutive years. It is the first time that Chinese companies are identified as failing to adhere to the Act. The five companies include fast-food restaurant company Yum China Holdings, semiconductor manufacturer ACM Research and biopharmaceutical companies Zai Lab and Hutchmed (China). They are required to submit evidence disputing their identification by March 29. If not, these companies may be delisted from U.S. exchanges in early 2024.
Yum China said the company’s shares listed on the New York Stock Exchange and the Hong Kong bourse are interchangeable. ACM Research responded that the holding shareholder is making efforts to meet the SEC requirements before the due date in 2024 while a similar statement has been made by BeiGene, parent of Zai Lab and Hutchmed. Zai Lab said their identification is within company expectations and it does not mean delisting from Nasdaq since the identification is temporary. Hutchmed has not responded so far.
The SEC’s latest move has hit the U.S.-listed Chinese companies' share prices and affected confidence in the companies. The Nasdaq Golden Dragon China Index, which monitors U.S.-listed Chinese companies, plunged 10.01% on March 10, its biggest daily fall since October 2008. Alibaba's and Tencent's share prices dropped 7.94% and 6.98%, respectively. With due respect for overseas regulatory bodies strengthening supervision over accounting practices aimed at improving financial information quality of public companies, the CSRC said it strongly opposes any wrongly adopted securities regulatory activity tainted with political motives, the China Daily reports.
