Some of China’s biggest state-owned companies – such as China Life Insurance, plus oil giants Petrochina and Sinopec – announced on Friday that they will voluntarily delist from the US stock market this month.
The companies, which also include Aluminium Corporation of China (Chalco), PetroChina and Sinopec Shanghai Petrochemical Co, said in separate statements that they would apply for delistings of their American Depository Shares from the New York Stock Exchange.
The five – which have a market capitalisation of more than $300 billion – will keep their listings in Hong Kong and mainland China.
China and the United States have been in talks to resolve a long-running audit dispute that threatens to see Chinese companies kicked off American exchanges if they cannot comply with US audit rules.
The companies’ decision comes amid heightened China and US tensions following US House speaker Nancy Pelosi’s visit to Taiwan last week.
The five firms were added to the Holding Foreign Companies Accountable Act (HFCAA) list in May after they were identified as not meeting US regulators’ auditing standards.
‘Sending a Message’
“China is sending a message that its patience is wearing thin in the audit talks,” said Kai Zhan, senior counsel at Chinese law firm Yuanda, who specialises in areas including US capital markets and US sanction compliance.
Washington has long demanded complete access to the books of US-listed Chinese companies, but Beijing bars foreign inspection of audit documents from local accounting firms, citing national security concerns.
US regulatory chief Gary Gensler said last last month he would not send inspectors to China, or Hong Kong, before the two countries have a final agreement that ensures unfettered access to audit materials.
But there was no direct mention of the auditing disputes in the companies’ separate statements on Friday.
The companies said on Friday their US traded share volume was small compared with those on their other major listing venues.
A statement from PetroChina said there was a “considerable administrative burden” performing disclosure obligations necessary to maintain its ADS listing on the NYSE because of differences in the rules of multiple listing venues.
China Life and Chalco said they would file for delisting on August 22, with delisting taking effect 10 days later. Sinopec and PetroChina said their applications would be made on August 29.
China’s securities regulator said on Friday that it was normal for companies to list and delist from capital markets, and that the four companies had chosen to delist from the US “on commercial considerations.”
The China Securities Regulatory Commission (CSRC) said the companies which plan to delist from the New York Stock market had strictly complied with US capital market rules.
It said planned delistings would not affect the companies from financing in other capital markets.
The audit dispute has intensified since the passing of the Holding Foreign Companies Accountable Act in 2020, which had strong bipartisan political support. It compels the US Securities and Exchange Commissioner to take action against companies that continue to ignore audit rules set out in the 2002 Sarbanes-Oxley Act.
The five companies are among more than 270 Chinese firms listed on US exchanges, which have a combined market capitalisation of more than $2 trillion.
However, with China – and other countries – increasingly concerned about data security, there has been increased speculation that companies which Beijing deems to have sensitive information will exit the US voluntarily and relist in Hong Kong or Shanghai.
Companies like Alibaba, Didi and some of the five set to exit US markets fit in this category.
- Reuters with additional reporting and editing by Jim Pollard