US slammed for barring China IPOs

Socio-Economic Research Centre executive director Lee Heng Guie (pic) said the new legislation would add more downside risks to the deep global recession and financial markets’ volatility.

PETALING JAYA: The new American legislation to bar foreign firms from listing on its stock exchanges could set off a fresh round of US-China trade and financial tensions, economists said.

Socio-Economic Research Centre executive director Lee Heng Guie said the new legislation would add more downside risks to the deep global recession and financial markets’ volatility.

“By imposing strict conditions or barring Chinese companies from being listed on US exchanges, it does not only deny opportunities for American pension funds and foreign investors participating in China’s high growth technology sectors but also significantly damp the US equity market’s vibrancy, ” he said in a note.

UOB Research’s senior economist Julia Goh (pic below) said the new legislative action came at a time of rising US-China tensions as well as recent accounting fraud at Luckin Coffee.

“It can be seen as part of efforts to address regulatory loopholes involving Chinese firms listed on US exchanges. In terms of impact, it may be limited for now as Chinese companies have three years to comply, ” she told StarBiz.

“However, it reflects greater hurdles for companies with the worsening bilateral US-China relationship and signals US’ approach on China is moving towards non-tariff measures, ” Goh added.

A positive take, however, would be that it opened up opportunities for further foreign direct investments (FDIs) into Malaysia as supply chain reorientation accelerated, said Goh.

On Wednesday, the US senate approved legislation that could lead to Chinese companies such as Alibaba Group and Baidu Inc being barred from listing on US stock exchanges. The bill, according to Bloomberg, was approved by unanimous consent and would require companies to certify that they are not under the control of a foreign government.

“Alarm has grown in particular that American money is bankrolling efforts by the country’s technology giants to develop leading positions in everything from artificial intelligence and autonomous driving to Internet data collection.”

Bloomberg reported that if a company couldn’t show that it is not under such control or the Public Company Accounting Oversight Board isn’t able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges.