A law that will allow throwing out of Chinese companies off US stock exchanges if they do not conform to the country’s auditing rules was passed by the United States House of Representatives.
Under the new law, companies will also need to officially state if they are owned or controlled by a foreign government or not.
The new act, called the Holding Foreign Companies Accountable Act, now required approval from the US president to be enacted.
This new law comes at a time when the US is also ramping up its pressure on China in the last few weeks of the presidency of Donald Trump.
A ban on import of cotton from a Chinese firm that the US administration believes uses the forced labour of detained Uighur Muslims was also imposed by the US government on Wednesday in addition to the new act.
Last week, action against Chinese-manufactured twist ties was undertaken by the US as it took the rare measure of imposing tariffs to counter the effects of what the US claims is Chinese currency manipulation.
Earlier this week, export control laws were introduced by China in retaliatory action. According to analysts, this measure by Beijing was in response to controls by the US on export of microchips that are the lifeline for many Chinese tech firms.
The new act passed by the US is likely to have little impact in the short term because foreign companies operating in China are liable to be banned if they do not comply with audit rules for a period of three straight years
While the bill’s passage was welcomed by the American Securities Association, it also called on the government to be swifter by delisting non-compliant companies by the middle of next year.
While publicly-listed companies from any country will come under the new legislation but the sponsors of the bill designed it to target Chinese firms.
“US policy is letting China flout rules that American companies play by, and it’s dangerous. Today, the House joined the Senate in rejecting a toxic status quo,” said Republican Senator John Kennedy, who is one of the bill’s authors.
There were 217 Chinese companies listed on these US exchanges as of October, according to the US-China Economic and Security Review Commission which was created by Congress to identify possible security threats from China.
Secondary listings in Hong Kong have recently been carried out by a number of US-listed Chinese companies, including Alibaba and KFC China operator Yum China.
Cotton imports from a Chinese state-owned enterprise have also been banned by the Trump administration. It alleges that the Chinese firm used the detained Uighur Muslims in Xinjiang province for forced labour to produce the cotton. Apart from being one of the largest cotton producers of China, the Xinjiang Production and Construction Corps is also a quasi-military organisation and it reportedly accounts for almost one fifth of the total GDP of Xinjiang province.
“China’s systemic abuse of forced labour in the Xinjiang Region should disturb every American business and consumer,” said CBP Acting Commissioner Mark A. Morgan in a statement.
(Adapted from BBC.com)