Traders work during the IPO of Chinese taxi company Didi Global Inc on the New York Stock Exchange (NYSE) floor in New York, U.S. June 30, 2021.
Brendan McDermid | Reuters
BEIJING. On Wednesday, China signaled support for Chinese equities after concerns over the risks of a US delisting led stocks in New York and Hong Kong to fall for several days.
Chinese and US regulators are working on a cooperation plan for US-listed Chinese stocks, state media reported, citing a financial stability meeting chaired by Vice Premier Liu He on Wednesday.
Liu also chairs the central government’s finance committee and is a member of the Politburo of the Central Committee of the Communist Party of China, the country’s second-largest power circle.
“The Chinese government continues to support the listing of various types of businesses overseas,” state media reported in Chinese, translated by CNBC. The article said regulators should “complete” the crackdown on internet platform companies “as soon as possible”.
The report from Wednesday’s meeting also said authorities would work to bring stability to Hong Kong’s financial market, as well as the struggling real estate sector.
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Hong Kong’s Hang Seng Index continued gains, gaining 9% on Wednesday afternoon, rebounding from its lowest closing level in six years. Chinese tech giants Alibaba and Tencent surged more than 20%, while shares of other big Chinese tech companies jumped.
“China’s top leadership has finally broken its silence to respond to the recent sell-off in the market,” Larry Hu, Macquarie’s chief China economist, said in a report. “The tone of the meeting is strong, which suggests that politicians are deeply concerned about the recent market crash.”
Worries about the forced delisting of Chinese stocks from US exchanges have added to investors’ fears of economic growth following the resurgence of Covid-19 and the war in Ukraine. On Monday, JPMorgan China internet analyst Alex Yao and his team said they consider the sector “uninvestable” for the next six to 12 months and downgraded the 28 stocks they cover.
The US Securities and Exchange Commission said last week that US-listed securities of five Chinese companies could be delisted.
This was the first time the regulator named specific actions for non-compliance with the Foreign Company Liability Act. A law passed in 2020 would allow the SEC to delist Chinese companies from U.S. exchanges if U.S. regulators fail to review company audits for three consecutive years.
Beijing’s concerns about information security have generally prevented Chinese companies from conducting such checks.
On Friday morning, the China Securities Regulatory Commission said in a statement that, along with the Treasury Department, it has made progress in communicating with the US Public Company Accounting Oversight Board.
“We believe that through joint efforts, both parties will be able to agree on cooperation as soon as possible in accordance with the legal and regulatory requirements of the two countries,” the Chinese securities regulator said in a statement, according to CNBC translation.
The PCAOB did not immediately respond to a request for comment after business hours.
Over the past two years, the Chinese government has cracked down on big tech companies due to alleged monopolistic practices and developers’ high exposure to debt. Investors became especially worried about US-listed Chinese stocks after Beijing capped Didi’s shares just days after its New York listing in late June.
Economists said in February that the worst of China’s crackdown is over as Beijing shifts its focus to supporting economic growth.
In late January, Shen Bing, director general of the international relations department of the China Securities Regulatory Commission, told CNBC in an exclusive interview that the commission hopes its upcoming updated rules will help Chinese companies resume their overseas listings.