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U.S.-listed Chinese Companies May Be Delisted | May 2022

The United States and China have been engaged in a decades-long auditing dispute over Chinese companies listed on U.S. stock exchanges. These 260-plus listed companies are subject to certain U.S. regulations, including rules requiring companies to share their books with the Public Company Accounting Oversight Board (PCAOB), but Beijing has refused. Though U.S. regulators have been lenient, lawmakers are now pushing Beijing to comply with a law that could potentially delist $1.4 trillion worth of Chinese stocks. 

Securities Market Defined 

Securities markets provide a mechanism for buying and selling securities, making it possible for owners to sell their stocks and bonds to other investors. The ability to sell securities at well-established market prices is one of the very pillars of the capitalistic society that has developed over the years in the United States.  

Unlike the primary market, in which corporations sell stocks directly to the public, secondary markets permit the trading of previously issued securities. There are many different secondary markets for both stocks and bonds. Secondary market trades may take place on organized exchanges or in what is known as the over-the-counter market. Many brokerage houses exist to help investors with financial decisions, and many offer their services through the Internet. The two biggest stock markets in the United States are the New York Stock Exchange (NYSE) and the Nasdaq market. 

Holding Foreign Companies Accountable 

In 2020, Congress passed the Holding Foreign Companies Accountable Act (HFCAA), a bipartisan law outlining auditing requirements for overseas companies that are listed on U.S. stock exchanges. Additionally, companies must prove they are not controlled by the state. If they cannot prove they are not state-run, the firms face even tougher disclosure requirements. If companies do not comply with the law for three consecutive years, the company will be delisted.   

With the first 3-year deadline looming, the U.S. Securities and Exchange Commission (SEC) published a list of 11 firms that would be delisted if they refused to comply with HFCAA. The list included large companies such as search engine company Baidu, digital brokerage Futu, and fast-food chain Yum China. Many uncertain investors reacted immediately by selling off Chinese stocks. 

China Aims for Compromise 

More than 50 foreign jurisdictions have allowed the PCAOB to inspect their books, but China and Hong Kong have not. Beijing considers auditing papers to be state secrets because they may contain sensitive data and information connected to state projects. Therefore, sharing books with U.S. regulators is seen as a threat to national security. Audit papers include the data accountants use to assess a company’s financial performance. 

In response to the threat to delist Chinese stocks, China’s securities commission changed its rules and said that foreign regulators can request to inspect U.S.-listed Chinese firms and their auditors. This move pleased investors, with Chinese stock values increasing, but it remains unclear if this concession is sufficient to appease U.S. regulators. China hopes to compromise by sharing books from firms in the private sector but shielding state-owned enterprises and technology companies. This compromise would protect state secrets and sensitive data. 

While American investors will lose out if Chinese stocks are delisted, Beijing arguably has even more to lose. Its economy has been unsteady, and its property market, which makes up roughly 25 percent of its economy, has been shaky. Though China’s economy is expected to grow by 5.5 percent in 2022, this is much lower than its previous 8.1 percent annual growth. China will have to fight to avoid losing access to U.S. financing channels.  

In the Classroom 

This article can be used to discuss the stock market (Chapter 16: Financial Management and Securities Markets). 


Discussion Questions 

  1. What is a securities market? 

  1. What is the Holding Foreign Companies Accountable Act (HFCAA) and what are its implications for Chinese firms listed in U.S. exchanges? 

  1. Why does China want to protect auditing papers? 

This article was developed with the support of Kelsey Reddick for and under the direction of Geoffrey Hirt, O.C. Ferrell, and Linda Ferrell. 



Jing Yang, "Some Chinese Companies Find Workaround to Avoid U.S. Delisting," The Wall Street Journal, April 5, 2022,  

 Yue Wang, "U.S.-Listed Chinese Companies Worth $1.1 Trillion Face Risk Of Delisting," Forbes, March 11, 2022,  

 Yvonne Lau, “Beijing Is Scrambling to Keep the U.S. From Kicking Chinese Firms Worth $1.4 Trillion off Wall Street. But Congress Is in No Mood for Compromise,” Fortune, April 16, 2022,  

About the Author

Geoffrey A. Hirt of DePaul University previously taught at Texas Christian University and Illinois State University, where he was chairman of the Department of Finance and Law. At DePaul, he was chairman of the Finance Department from 1987 to 1997 and held the title of Mesirow Financial Fellow. He developed the MBA program in Hong Kong and served as director of international initiatives for the College of Business, supervising overseas programs in Hong Kong, Prague, and Bahrain, and was awarded the Spirit of St. Vincent DePaul award for his contributions to the university. Dr. Hirt directed the Chartered Financial Analysts (CFA) study program for the Investment Analysts Society of Chicago from 1987 to 2003. He has been a visiting professor at the University of Urbino in Italy, where he still maintains a relationship with the economics department. He received his Ph.D. in finance from the University of Illinois at Champaign-Urbana, his MBA at Miami University of Ohio, and his BA from Ohio Wesleyan University.

Profile Photo of Geoffrey A. Hirt