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ANKARA
Chinese companies listed and listed on the US stock market are concerned about uncertainty over trade tensions between the United States and China ahead of the November presidential election.
Almost 800 days since US President Donald Trump triggered a trade conflict with Beijing, Chinese companies have already begun to feel pressure for increased regulatory oversight in US securities markets, since a Senate bill. to the forced sale of the US companies of TikTok.
The video-sharing app, along with the payment and messaging app WeChat, was banned from US app stores last Sunday due to Trump executive orders claiming they were “maliciously” collecting personal data from US users.
It will not be surprising that Trump will toughen his stance on trade relations between China and the United States, as he also blames Beijing for the emergence and spread of the coronavirus around the world that paralyzed major economies.
Trump’s opponent in the White House race, Democratic nominee Joe Biden, is expected to have a softer diplomatic approach toward Beijing.
But he would not end the trade conflict, after his campaign adviser, Kurt Campbell, indicated that Democrats acknowledged that Trump was “accurate in diagnosing China’s predatory practices,” which include technology transfers, intellectual property rights and the growing US trade deficit with China.
Since starting a trade war in February 2018, the Trump administration has imposed tariffs on Chinese goods worth $ 550 billion. Beijing responded by imposing tariffs on $ 185 billion on American goods.
Despite the tariffs, the U.S. trade deficit in July 2020 soared to $ 63.6 billion, its highest level since July 2008, due to record increases in imports, according to the U.S. Department of Commerce.
The United States’ trade deficit with China was $ 375 billion in 2017, but that figure increased to $ 419 billion in 2018. It then dropped to $ 345 billion in 2019 when tariffs were applied, according to the United States Census Bureau.
Accounting, important transparency issues
Trade tensions aside, Chinese companies, like other non-US companies, have long enjoyed high exposure and access to investors and capital when it comes to listing on the New York Stock Exchange (NYSE ), the world’s largest financial market valued at more than $ 35. trillions.
However, that could change if trade relations with Washington do not falter after the November 3 presidential election, when Chinese companies could start looking for other financial markets for capital and investors.
Listing on the New York Stock Exchange could also pose a legislative burden for Chinese companies, after the US Senate passed a bipartisan bill in May “to kick deceptive Chinese companies off US stock exchanges.”
“It is stupid that we are giving Chinese companies the opportunity to exploit hardworking Americans, people who put their savings for retirement and college in our exchange, because we do not insist on examining their books,” said Republican Senator John Kennedy. from Louisiana. He said about the bill.
“As we continue to experience the economic fallout and volatility caused by the COVID-19 pandemic, the need to protect top investors is even more important. For too long, Chinese companies have ignored US reporting standards. , misleading our investors, “he said. Democratic Senator Chris Van Hollen of Maryland.
150 Chinese companies with a market capitalization of 1.2 trillion dollars in the US.
After the 2008 global financial crisis, China-based companies listed on US stock exchanges have risen, but so have the problems they bring, such as irregular accounting practices and a lack of transparency, compared to standards. Americans.
Even in China, some companies are facing problems, such as the coffee chain Luckin Coffee being fined a $ 9 million fine by Chinese regulators on Tuesday for fraudulent practices to inflate sales and profit figures.
As of February 25, 2019, there were 156 Chinese companies, 11 state-owned, listed on the US stock exchanges with a total market capitalization of $ 1.2 trillion, according to the Economic and Security Review Commission. from the United States and China. That amount is about 3.5% of the valuation of the US stock market.
At the top of the list, based on market capitalization, is e-commerce company Alibaba, which had an initial public offering (IPO) on the NYSE in 2014, raising $ 25 billion on its first day of offering. of stocks and marking the largest IPO in world history at the time.
Next are Chinese energy companies, such as Asia’s largest oil and gas producer PetroChina, a subsidiary of the state-owned China National Petroleum Corporation (CNPC), followed by China Petroleum & Chemical Corporation (Sinopec).
After those companies are China Life Insurance Company, China’s largest life insurer with 70% state ownership, and then come tech companies like internet firm Baidu, China Telecom, and online retailer JD.com.
Asian markets offer a higher valuation
Those major energy and technology companies, of course, have the option of exiting the US stock market and listing on other exchanges in Hong Kong, London, and Tokyo, a move that could damage the long-standing power of the US. As a global financial capital. if it becomes a trend for other companies from different nations.
Not all Chinese companies can succeed like Alibaba, but Asian markets have recently understood the value of startups showing high potential and have started to make local listings more affordable and attractive.
Luckin Coffee, which was founded in Beijing in 2017, has a market capitalization of $ 550 million on the NYSE, but its number of stores surpassed those of Starbucks in China as of January, showing great potential for expansion.
Tencent, the world’s largest video game provider and owner of the popular social payment and messaging app WeChat, which was also banned by Trump from US app stores, only has a market capitalization of $ 49k. million on the NYSE, but $ 4.8 trillion in Hong Kong stocks. to exchange.
Since the 2008 financial crisis, China’s GDP has expanded 6-11%, opening its economy faster than the United States and Europe amid COVID-19. Some experts note that the growing size of the middle class and the rapid growth of investors in the world’s second-largest economy are strong support for Chinese companies in local stock markets.
Considering that the world’s strongest economic powerhouse, the United States, saw its economy contract a record 31.7% during the April-June period of this year, while consumer spending has barely recovered from the current recession, which is the largest since the Great Depression.
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