Chinese state-owned enterprises announce delisting from NYSE

A number of Chinese state-owned enterprises announced that they will seek delistings from the New York Stock Exchange (NYSE), a move experts said is a sensible business choice made on their own to reduce their exposure to regulatory uncertainties. China’s major oil producers Sinopec and PetroChina both informed the NYSE that they will apply for voluntary delistings of their American depositary shares (ADS) listed on the exchange in accordance with laws and regulations. Citing the small trading volumes of their U.S. listings but high compliancy costs, the companies said they plan to submit delisting filings to the U.S. Securities and Exchange Commission (SEC) around August 29 and are expected to leave the NYSE by September.

Three other SOEs — China Life Insurance Co, Aluminum Corp of China and Sinopec Shanghai Petrochemical Co — also said they will voluntarily apply to delist from the New York bourse, effective early next month. The China Securities Regulatory Commission (CSRC) said that it respects the decisions made by the U.S.-listed Chinese issuers based on their own conditions. The Commission will maintain communication with relevant overseas regulatory agencies to jointly safeguard the legitimate rights and interests of the Chinese enterprises and their investors.

“Listing and delisting are normal in the capital market. According to the announcements from relevant enterprises, they have strictly abided by U.S. capital market rules and regulatory requirements since their listing in the U.S., and the delisting decisions were made out of consideration for their own business development,” a CSRC official said. “As these enterprises are listed on multiple stock markets, and their shares traded in the U.S. only account for a small proportion of the total, their delisting from the U.S. stock markets will not affect the continued use of the domestic and foreign capital markets for financing and development,” the official added. The delisting decisions came amid an ongoing audit dispute between China and the U.S. that has exposed some U.S.-listed Chinese issuers to the risk of forced delistings. “The Holding Foreign Companies Accountable Act, which was passed in 2020 in the U.S., forced Chinese enterprises to deal with unreasonably strict and institutionally discriminatory information disclosure requirements,” Dong Dengxin, Director of the Wuhan University of Science and Technology’s Finance and Securities Institute, said, as reported by the China Daily.

The Global Times adds that the U.S. government has constantly intensified its crackdown against a wide range of Chinese companies, including a push to delist U.S.-listed companies by changing audit rules. Before the latest announcements, more than 20 Chinese companies listed in the U.S. had sought listings in the Chinese mainland or Hong Kong via primary, secondary or dual primary listings. The number is likely to increase in the coming months as the SEC had put 159 Chinese concept stock companies on its delisting watch list by the end of July. PetroChina said that ADS represented approximately 3.93% of its total number of H shares and approximately 0.45% of the total share capital of the company as of August 9.

The delistings announced on the same day could be a blow to the influence of the U.S.' financial sector across the world, experts noted. “As the U.S. chooses to reject instead of attract more qualified global companies to list in its markets, its market size will shrink, which goes against its wish to maintain the top position among global capital markets,” Li Daxiao, Chief Economist at Shenzhen-based Yingda Securities, told the Global Times. “On a smaller scale, the SEC is setting increasingly more hurdles like audit rules or information disclosures for Chinese companies. In a larger sense, the two countries' relations have become increasingly uncertain and it's very likely that listed companies will experience unfair treatment in the US amid such political tensions,” Li said.

There are about 250 Chinese companies listed in the U.S., whether directly or by using ADS.