"Chinese Companies Delisted from NYSE Only Benefit Hong Kong Stock Market"

US PIIE: "Delisting Chinese Companies from NYSE Is Not an Effective Sanction"
Market Cap of Chinese Firms Listed in US Only 3.8% of China's Financial Market
Chinese Firms Listed on NYSE Flee to Hong Kong... IPOs Increase Only in Chinese Stock Market

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] An analysis has emerged that the U.S. government's financial sanctions against China, including the expulsion of Chinese companies from the New York Stock Exchange, are meaningless. This is because the scale of financing that Chinese companies raise through the New York Stock Exchange is negligible in the overall Chinese financial market, and they can also raise U.S. capital through the Hong Kong Stock Exchange, making it an ineffective sanction.

According to CNBC on the 5th (local time), the Peterson Institute for International Economics (PIIE), a U.S. think tank, stated in a report released that day, "The U.S. government believes that expelling Chinese companies from U.S. stock markets will slow their growth and have a financial sanction effect, but such a thing is unlikely to happen," and explained, "Even if fundraising through the New York Stock Exchange is cut off, the impact on Chinese companies will be very limited."

PIIE pointed out, "As of the end of last year, the number of Chinese companies listed on the New York Stock Exchange, as counted by the U.S. Securities and Exchange Commission (SEC), was 224, with a market capitalization of $1.8 trillion (approximately 2,155 trillion won)," adding, "This accounts for only 3.8% of China's total financial market, which is $47 trillion."

On the 4th of last month, President Donald Trump ordered the U.S. Treasury Department to strengthen listing standards within 60 days to improve the management transparency of Chinese companies listed on U.S. stock exchanges. Luckin Coffee, a Nasdaq-listed company that had been under suspicion of accounting fraud since April, was eventually delisted on the 29th of last month due to the overlapping effect of the strengthened listing standards.

Around the time of Luckin Coffee's delisting, many Chinese companies listed on the New York Stock Exchange began moving to the Hong Kong Stock Exchange starting last month. According to Bloomberg, major Chinese IT companies such as Alibaba, JD.com, and NetEase, which were listed on the New York Stock Exchange, conducted secondary listings on the Hong Kong Stock Exchange last month. Companies like Baidu, Yum China, and Trip.com are also preparing to list on the Hong Kong Stock Exchange. With companies returning from the New York Stock Exchange, the amount of funds raised through initial public offerings (IPOs) on the Chinese stock market in the first half of this year recorded $19.7 billion, a 122% increase compared to the previous year.

PIIE added, "Contrary to the U.S. government's thinking, Chinese companies can access global capital, including U.S. capital, through the Hong Kong Stock Exchange," and noted, "Ironically, the biggest beneficiary of the U.S. policy to delist Chinese companies is the Hong Kong Stock Exchange (SEHK)."