After passing unanimously in the U.S. Senate on May 20, 2020, the Holding Foreign Companies Accountable Act is heading for the House of Representatives, and U.S. President Donald Trump is expected to sign it into law. The law requires that all companies listed on U.S. stock exchanges submit to audits reviewable by the U.S. Public Company Accounting Oversight Board (PCAOB), and non-compliant firms can be delisted after three years. This has generated talk that all Chinese firms could disappear from U.S. exchanges.
Some observers might question the wisdom of such legislation, on the grounds that it could hurt returns on U.S. household savings, financial-sector profits, and the global competitiveness of U.S. stock exchanges. While these are legitimate concerns, a U.S. threat to delist Chinese firms could be worth the risk, leading not only to more credible disclosures, but also, perhaps surprisingly, to more listings by high-quality Chinese private-sector firms.
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