Concerns over the potential delisting of Chinese stocks from U.S. exchanges have been reignited, particularly following comments from U.S. Treasury Secretary Scott Bessent. His April 9 statement, which hinted that “everything is on the table,” has fueled fears on Wall Street that hundreds of billions of dollars could be withdrawn if Chinese companies are forced off U.S. exchanges. This comes amid the 2020 law that gives the U.S. Securities and Exchange Commission (SEC) the power to delist Chinese stocks if they fail to comply with audit requirements for two consecutive years.
The potential delisting could have significant financial repercussions, with Goldman Sachs warning that U.S. investors may need to liquidate up to $800 billion in Chinese stock holdings. Despite these concerns, some companies, such as KraneShares, believe the likelihood of delisting remains low. They have already adjusted their investments by shifting funds into Hong Kong-listed shares, anticipating possible future moves. Nevertheless, the pressure for regulatory scrutiny continues to mount, especially as U.S. lawmakers and government agencies ramp up their efforts to hold Chinese firms accountable for audit transparency.
In the broader context, the U.S. government has been increasing its scrutiny of Chinese investments, spurred by former President Trump’s “America First Investment Policy” memo, which mandates a review of U.S.-China economic relations and investment structures. This memo, alongside legislation like the Holding Foreign Companies Accountable Act, has fueled tensions regarding the regulatory landscape. As the SEC enforces compliance, the window for potential delistings may be closer than previously expected, with some analysts predicting action as early as 2026.
Although China’s securities regulator has recently tightened its own rules on companies seeking to list abroad, this has not stopped companies like Alibaba from taking precautionary steps, such as listing additional shares in Hong Kong. While a major crisis appears unlikely in the short term, the ongoing tensions reflect a deeper geopolitical rift between the U.S. and China, with financial markets at the center of the conflict.
Source: CNBC