TCW Group says most Chinese companies can delist from US

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A global wealth manager said Wall Street-listed Chinese companies will likely be kicked out of US capital markets over the next three years as tensions between Beijing and Washington continue, a firm said. global asset management company.

“I think for a lot of Chinese companies that list in U.S. markets, the game is about,” David Loevinger, executive director of emerging markets sovereignty research at TCW Group, told CNBC on Wednesday. basically ended. “This is a problem that’s been there for 20 years – we haven’t been able to solve it.”

TCW Group has $265.8 billion in assets under management as of September 30, 2021, according to the company’s website.

US Securities and Exchange Commission this month the complete rules for the implementation of the law that would allow the market regulator to ban US-listed foreign companies from trading if their auditors fail to comply with requests for information from US regulators.

The law was passed in 2020 after Chinese regulators repeatedly rejected requests from the Public Company Accounting Supervisory Board to inspect audits of listed and trading Chinese companies. business in the United States.

Given the current level of distrust between the US and Chinese governments, and the bilateral relationship unlikely to improve anytime soon, “there’s no way we’re going to solve this for the next few years,” Loevinger said. .

“So the reality is that by 2024, most of the Chinese companies listed on US exchanges will no longer be listed in the US. Most will go back to Hong Kong,” he told CNBC. Kong or Shanghai”.Asian street signs. “

Less than six months after going public, Chinese ride-hailing giant Didi said it will begin delisting on the New York Stock Exchange and plan to list in Hong Kong instead.

When a company deletes from an exchange like Nasdaq or New York Stock Exchange, it loses access to many buyers, sellers, and middlemen.

I just don’t think the Chinese government will allow US regulators to have uncensored access to the internal audit documents of Chinese companies.

Chinese regulators have reported unhappy with Didi’s decision to list in the US without first addressing outstanding cybersecurity concerns. Regulators have asked the company’s executives to come up with plans to delist from the United States due to concerns about data leaks, according to the report.

In addition to Didi, many of the top Chinese internet companies listed in the US have made dual listings in Hong Kong. Some well-known names include e-commerce giants Alibaba, its rival, search engine giant Baidu, game company NetEase and social media giants Weibo.

“We’ve reached a turning point,” Loevinger said, pointing to Didi’s delisting announcement. “I just don’t think the Chinese government is going to allow US regulators to have unchecked access to the internal audit documents of Chinese companies.”

“And if US regulators can’t access those documents, they can’t protect US markets from fraud,” he added. TCW Group says most Chinese companies can delist from US


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