The Under-The-Radar War With China

On August 6th, The Department of the Treasury posted a press release on the Internet.

This is a portion of that press release:

In response to President Trump’s June 4 Memorandum on Protecting United States Investors from Significant Risks from Chinese Companies, the President’s Working Group on Financial Markets (PWG) today released a report making five recommendations. These recommendations are designed to address risks to investors in U.S. financial markets posed by the Chinese government’s failure to allow audit firms that are registered with the Public Company Accounting Oversight Board (PCAOB) to comply with U.S. securities laws and investor protection requirements.

“The PWG examined the risks to investors posed by the Chinese government’s failure to allow access. The PWG unanimously recommends that the Securities and Exchange Commission take steps to enhance the listing standards on U.S. exchanges for access to audit work papers, among other recommendations,” said Secretary Steven T. Mnuchin, Chairman of the PWG. “The recommendations outlined in the report will increase investor protection and level the playing field for all companies listed on U.S. exchanges. The United States is the premier jurisdiction in the world for raising capital, and we will not compromise on the core principles that underpin investor confidence in our capital markets.”

Basically what that says in that Chinese companies investing in the U.S. stock markets will be required to comply with the same auditing standards that American companies are required to comply with. That should be an obvious requirement, but has not been in the past. Actions have consequences.

On Monday The Epoch Times reported:

A rising number of Chinese companies are considering delisting from the U.S. stock exchanges as Washington increases its crackdown on foreign companies that fail to comply with U.S. audit standards.

Chinese online travel giant Ctrip is the latest company reportedly exploring going private. The company has held early-stage talks with a number of investors, including private equity firms and tech companies, about funding its delisting from Nasdaq, Reuters reported.

Chinese companies would rather leave U.S. stock markets than comply with the auditing requirements that American companies are subject to. That tells us all we need to know about the financial practices of Chinese companies.