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On Friday, two senior U.S. lawmakers called on the U.S. Securities and Exchange Commission to delist 25 Chinese companies from U.S. stock exchanges, citing national security concerns over alleged military ties.
The companies include Alibaba Group Holding Ltd. (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), JD.com, Inc. (NASDAQ:JD), Hesai Group (NASDAQ:HSAI), BilliBili, Inc. (NASDAQ:BILI), XPeng, Inc. (NYSE:XPEV) and Weibo Corp. (NASDAQ:WB). The complete list includes 25 Chinese firms listed on U.S. stock exchanges.
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The Details: Rep. John Moolenaar, chair of the House China committee, and Sen. Rick Scott, chair of the Senate committee on aging, wrote to SEC chair Paul Atkins arguing that China-based firms benefit from U.S. investor capital while advancing the strategic goals of the Chinese Communist Party, including military modernization and human rights abuses.
The lawmakers claim that, despite their commercial appearance, the companies are ultimately used for state purposes due to China's military-civil fusion policy, and that the true extent of Chinese government control is hidden from U.S. investors.
They urged the SEC to use its authority under the Holding Foreign Companies Accountable Act to suspend trading and force the delisting of companies that do not adequately protect American investors.
Why It Matters: If Chinese companies are delisted from U.S. exchanges, investors could face several key consequences including increased volatility, particularly for funds with significant exposure to Chinese equities like the KraneShares CSI China Internet ETF (NYSE:KWEB).
If Chinese companies are delisted from U.S. exchanges, investors could also face forced selling, reduced liquidity, potential losses, and operational hurdles.
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