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Why China and U.S. Are Clashing Over Stock Listings

Stocks Climb Amid Tech Rebound
Photographer: Michael Nagle/Bloomberg
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Chinese companies in need of capital have long headed to the U.S. stock market to tap deep-pocketed investors, raising more than $100 billion in first-time share sales over the past two decades. The money flow was profitable for company founders, bankers, early investors and new shareholders. All this has changed due to actions by both countries. Ride-hailing giant Didi Global Inc. said it would withdraw from the New York exchange, a stunning reversal as it yielded to demands from Chinese regulators.

Under a law signed by President Donald Trump a month before he left office, Chinese companies may face delisting starting in 2024 if they refuse to show financial information to American regulators. Rules developed by the U.S. Securities and Exchange Commission to carry out that law require that audits done for Chinese companies be made available for inspection by the U.S. Public Company Accounting Oversight Board, a quasi-governmental body created by Congress two decades ago to improve the integrity of audits. China has refused to let the PCAOB examine audits of its firms, citing national security concerns. The SEC said that while more than 50 jurisdictions work with the PCAOB to allow the required inspections, two historically have not: China and Hong Kong.