The Senate passed a bill yesterday that could remove rule-flouting Chinese firms from American stock markets if their last three years’ audits aren’t clean.
The Holding Foreign Companies Accountable Act was introduced more than a year ago by Senators John Kennedy, R-La., and Chris Van Hollen, D-Md.
And it’s journey through the senate has come at an ideal time as President Donald Trump looks for ways to punish China for its handling of the coronavirus pandemic, a disease that originated in Wuhan, the capital of Central China’s Hubei province.
The legislation followed concerns Chinese firms were not following the same investor protection rules and accounting standards as companies based in the US were expected to, Fox Business reported.
The Holding Foreign Companies Accountable Act was introduced more than a year ago by Senators John Kennedy, R-La., and Chris Van Hollen, D-Md. Pictured, an empty New York Stock Exchange in the Wall Street financial district of Manhattan
The legislation says ‘if you want to list on an American exchange, you have to submit an audit and the SEC has the right to look at that audit, and audit the audit,’ Kennedy said on the Senate floor.
‘And if you refuse not once, not twice, but three times — if over a three-year period, each of those three years, the company says, ‘You cannot audit my audit’,’ then they can no longer be listed.’
The investing loophole has seen small retail investors facing a high risk of fraud.
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The bill, which was passed on Wednesday, will demand foreign companies to allow the Public Company Accounting Oversight Board a look into their books.
The non profit was created by Congress following the WorldCom and Enron scandals of the early 2000s, which saw the two major US companies fiddling their accounts to hide bad debt and boost assets.
If the board is denied access to foreign stock issuer’s books for three years the Securities and Exchange Commission will ban them from trading in shares on US exchanges.
The bill, which was passed on Wednesday, will demand foreign companies to allow the Public Company Accounting Oversight Board a look into their books (file image)
The legislation has yet to pass through the Democrat-controlled House of Representatives and will need to be signed by the president before it is brought into law.
Carson Block, short-seller and founder of Muddy Waters Research, told FOX Business in an emailed statement: ‘By listing in the US, these companies have ready access to US retail investors’ money, and so long as China effectively remains a rogue country for US securities regulation, its companies should not have access to our markets.’
The measure also would require public companies disclose whether they are owned or controlled by a foreign government.
The bill is written to apply to all foreign companies, but it is targeted at China, and follows intense criticism of Beijing by Trump that has been echoed by Republican and Democratic lawmakers.
Trump and other officials in his administration insist that China mishandled the novel coronavirus during the early weeks of an outbreak that has spread into a global pandemic that has killed more than 328,000 people and cratered global economies.
Beijing denies such allegations.
The legislation has yet to pass through the Democrat-controlled House of Representatives and will need to be signed by the president before it is brought into law. Pictured, Donald Trump speaking at the White House yesterday
‘There are plenty of markets all over the world open to cheaters, but America can’t afford to be one of them. China is on a glidepath to dominance and is cheating at every turn,’ Kennedy said in a statement.
‘For too long, Chinese companies have disregarded U.S. reporting standards, misleading our investors,’ Van Hollen said.
Some 156 Chinese companies were listed on the US exchanges as of February 15, 2019, racking up a joint worth of $1.2 trillion, according to the US-China Economic and Security Review Committee.
This week Luckin Coffee, a Xiamen China-based chain once tipped to overtake Starbucks was delisted from Nasdaq when the company’s chief operating officer was found to have fabricated as much as $310 million in sales in 2019.
The company had debuted on the Nasdaq on May 16, 2019, selling shared for $17 each.
By January 17 the shares had trebled in size to a high of $50.02, meaning the now coffee giant was valued at as much as $12.02 billion.
It’s value nosedived to below $700 million on Wednesday.
Senator John Kennedy, R-La., was one of two senators to put the bill forward. Pictured speaking to a member of the press after a vote at the US Capitol on May 14
China just needs to be ‘responsible and there needs to be no double standards,’ Sen. Martha McSally, R-Ariz., told FOX Business’ Neil Cavuto on Wednesday.
The US has led the charge against China over its response to the pandemic.
President Donald Trump has accused Beijing of a series of cover-ups amid the outbreak and said in April he had seen evidence that the virus started in the Wuhan virology laboratory.
He also warned he could impose tariffs of $1 trillion on China in retribution for the pandemic.
Beijing has hit back at the claims with a spokesman for China’s Foreign Ministry last month warning the ‘enemy is the virus, not China’.
It comes as a Chinese author who kept an online diary about her lockdown life in Wuhan has revealed how authorities initially told residents the deadly coronavirus was ‘not contagious between people.’
Wuhan-native Fang Fang, 64, launched a ‘forbidden’ journal to capture what she heard, read and saw during the epidemic from the viewpoint of an ordinary resident at the epicentre of the crisis.
In a gripping new extract published by the Sunday Times, the author confessed it was her brother who first told her the virus was contagious, having previously been informed it was ‘controllable and preventable.’
Fang Fang, 64, launched a ‘forbidden’ journal to capture what she heard, read and saw during the epidemic from the viewpoint of an ordinary resident at the epicentre of the Covid-19 crisis
On February 1, she said: ‘Now that I think back, it was actually my eldest brother who first told me that this virus was contagious. He teaches at Huazhong University of Science and Technology.
‘On December 31, he forwarded to me an essay entitled ‘Suspected Case of Virus of Unknown Origin in Wuhan’.
‘However, it wasn’t long before the official government line came down: ‘Not contagious between people; it’s controllable and preventable.’ As soon as we heard that, everyone breathed a collective sigh of relief.’
Fang Fang, who was born in Nanjing but moved to Wuhan aged two, posted her diary entries to Chinese social media sites Weibo and WeChat, but the blogs were quickly deleted by censors.
Her journal, which began on January 25 as the crisis began to spiral out of control, described the scramble for facemasks, food and supplies as hospitals across the city of 11million teetered on the brink of collapse.
Fang Fang (left speaking to media in Wuhan on February 22) previously admitted she had received threats and was worried about her safety. One person urged her to kill herself or face attacks in a street poster in Wuhan (right)
Pictured: Residents wear face masks as they walk through a park in Beijing, China on May 17
In a later entry, on February 12, Fang Fang claimed medics and ‘probably even some patients’ at a temporary hospital sang to coronavirus patients in their sickbeds when a ‘certain local political leader’ visited.
The next day, in what became one of her most-read entries, the author described the grim scene inside a local crematorium, in a photograph sent to her by her doctor friend.
Fang Fang explained the photograph showed a ‘pile of mobile phones on the floor of a funeral home; the owners of those phones had already been reduced to ash.’
Her diary continued to recount heartbreaking tales from inside lockdown, including a three-year-old child who was afraid to go outside and lived on crackers for days after the death of her grandfather, until good news peeked through on March 19.
On this day, Fang Fang wrote, there were ‘no new cases of novel coronavirus in Wuhan and no new suspected cases.’
Throughout the following days, the author described how the city began ‘gradually opening up’, and she even heard the laughter of a child outside for the first time in weeks.
Her last post was posted on March 24, when the government announced it would lift the lockdown restrictions on April 8.
Pictured: Patients rest at a temporary hospital at Tazihu Gymnasium in Wuhan, Hubei province, on February 21
Pictured: People wearing protective face masks cross a road in Wuhan on March 31
But Fang Fang’s diary of the tragedy unfolding in her hometown wasn’t met with positivity from all her millions of readers, and she revealed last month she has faced death threats after agreeing to publish it in the West.
Several of her candid accounts have been deleted, the author told Caijing in April, and her account on Weibo was blocked temporarily during the two-month quarantine.
She said she has received threats and was worried for her family’s safety after being targeted by furious web (http://rankingbukmacherow0120.westbluestudio.com) users who spread fabricated and defamatory claims about her and even exposed her home address.
One angry reader even sent a death threat to Fang Fang in the form of a huge poster posted on a street in central Wuhan, reported Radio France Internationale.
The Caijing report also disappeared shortly after its publication, but some Chinese websites based overseas have managed to re-post the piece.
Throughout the lockdown, Fang Fang had touched on politically sensitive topics such as overcrowded hospitals turning away patients, mask shortages and relatives’ deaths.
‘A doctor friend said to me: in fact, we doctors have all known for a while that there is a human-to-human transmission of the disease, we reported this to our superiors, but yet nobody warned people,’ she wrote in one entry.
Born into a family of intellectuals, the writer’s real name is Wang Fang but she uses the pen name Fang Fang.
Pictured: A group gather at a park in Beijing, China on May 17 as medics warn there could be a second wave of the virus
Fang Fang confessed it was her brother who first told her the virus was contagious, having previously been informed it was ‘controllable and preventable’ (Pictured: Residents in Beijing)
Her journal was once celebrated by Chinese web users who praised her for speaking out for those people in Wuhan who were suffering during the epidemic.
But her coronavirus stardom came to a sudden end when it was revealed that her posts would be compiled into a book and published in English and German.
The English version, which will go on sale on June 30, has ‘Dispatches from a quarantined city: Wuhan Diary’ written on the cover.
The German version is the more disputed edition out of the two. Its cover, sporting a black mask, bears the words ‘Wuhan Diary: The forbidden diary from the city where the corona crisis began’.
Critics say the 64-year-old, who was awarded China’s most prestigious literary prize in 2010, is providing fodder to countries that have slammed Beijing’s handling of the pandemic.
China has been accused of concealing information about the deadly virus from international powers at the start of the pandemic.
Some critics have even accused Fang Fang of being a ‘hanjian’, a derogatory term for a race traitor to the Han Chinese.
Hu Xijin, editor-in-chief of nationalist tabloid Global Times, said the diary’s foreign publication ‘is not really in good taste’ in a Weibo post on March 19.
‘In the end, it will be the Chinese, including those who supported Fang Fang at the beginning, who will pay the price of her fame in the West,’ Hu said in the comment that drew more than 190,000 likes.
An article in the state-run newspaper said that to many Chinese people, the book is ‘biased and only exposes the dark side in Wuhan’.
Loyal fans of the author, on the other hand, have rallied around her on Weibo.
‘Fang Fang owes nothing to anyone,’ wrote one. ‘You’re free to write a diary that goes against what she wrote, translate it and publish it abroad!’